How to make ends meet with one paycheck
You've decided it's better for your family to have one adult at home, or maybe a layoff made that choice for you. In either case, moving from two incomes to one requires looking for opportunities to spend smarter. Here are strategies for living on one income.
Strategy 1: Create a before-and-after budget. There's no better tool for managing your money than a budget. Looking over your monthly statements from Online Bill Pay is a great way to get a handle on where your money is going. Also keep a diary of how you spend ATM withdrawals to understand your cash habits.
Strategy 2: Build an emergency fund. If you're planning a shift to one income, save up an emergency fund in advance. Especially when there's only one income, your family needs a fallback in case the main wage earner loses his or her job. Having a cushion can also help in case family expenses are higher than you anticipated, which can easily happen if you have a new baby. The emergency fund can also be used in the future to pay for training if you decide to return to work.
Strategy 3: Master the art of cutting and trimming. Armed with your eye-opening budget, pull out two different colored pens. Start by circling all the work-related expenses you can get rid of, like dry cleaning and coffee on the way to work. Now take the other pen and mark every expense you can trim, such as gym memberships. If you were to shave a combined $50 a month from the cable bill and cell phone bill, you would save $600 over the year.
Strategy 4: Drive your way to savings. Can your family get by with one less car now that one of you isn't working? Do the math of how much you can save by selling the second vehicle or taking it off the road until you need it again. You'll eliminate some insurance, gas and maintenance costs. See if you can cut expenses further if the working spouse takes public transportation.
Savings Tip #15
If you switch from driving to work to taking public transit, check with your auto insurance agent to see if you qualify for a lower annual premium now that you will sharply reduce your annual mileage.
Strategy 5: Spend time, not money. Maybe in the past you used to hire help for housekeeping, babysitting or yard care, or perhaps you relied on takeout foods for lunch and dinner frequently during time-strapped workweeks rather than preparing meals at home. Now that you're developing a plan for how to live on one income, it's the perfect time to switch to doing cooking and chores yourself rather than paying someone else to do it for you.
Strategy 6: Look for part-time or second jobs. If the goal is to have one parent at home with the kids, the stay-at-home parent might find a part-time job on weekends or evenings. Sometimes the partner with the main job may be able to take on a second job.
It can be a challenge living on one income if you-re used to two. However, with careful budgeting you can ease the transition and help ensure your family's financial security.
What's next? 10 ways to save money