Adjusting Your Budget From Two Incomes to One Income

Adjusting Your Budget From Two Incomes to One Income

Going from a two income family to a one income family is scary.  All of a sudden you feel like the flexibility in your life is disappearing.  The freedom to buy.  The exhilaration of making a last minute trip.  The nonchalance of opting to order out rather than fire up the stove.

On my birthday, February 28 (mark your calendars…I like Starbucks gift cards), I left my part-time telecommute job at a nonprofit I’d worked for since 2009.  I didn’t make a lot of money, but I did make enough to give us a little bend and flex and spontaneity in our budget.  It was a difficult decision to make, mainly because I find comfort in regular, reliable income.  But it wasn’t as difficult as it could’ve been if we didn’t make a conscious decision to live on one income 6 and a half years ago.

Making the Choice to Live On One Income

When I decided to be a stay-at-home parent, I was working full-time and Homeskillet and I were rolling pretty deep for twenty-somethings.  We did a lot of things right.  We set established an emergency savings account ($20,000 over the course of three years), we invested for retirement (another $20,000), and we paid down some debt ($15,000).

And we lived as large as we wanted.  It wasn’t a big deal to go on a last minute vacation or buy a new laptop.  I never blinked when it came to buying something frivolous, like a new-release DVD.  Sigh, I miss those times!

When we had La Grande in 2006, I stepped away from work in mid-July with no plans to return until after her 1st birthday.  We knew we needed to adjust our lifestyle to prepare for living on one income, so we started scaling back, bit by bit.  This is how we did it.

How to Transform from a Two-Income Budget to a One-Income Budget

We figured out exactly how much it costs to keep our household going from a basic needs perspective.  Forget flexible expenses like food, clothing, and gasoline…channel your inner Beyonce and focus on bills, bills, bills:

  • Rent/Mortgage
  • HOAs & Residential Community Fees
  • Utilities
  • Insurances
  • Loan/Credit Card Payments…minimums

Write that total down.  That’s what you no-kidding have to cover every single month or else.

 Can this all be covered by one income?  If yes, good…you’re on your way.  If no, you’re facing some drastic cuts and/or total changes in the way you live.  Check out what I have to say about reducing your housing costs and utility costs.

Jot down the monthly totals for flexible expenses and contracted services that can be scaled back or adjusted or dropped all together.

  • Food/Groceries (good estimator $150 – $200 per person per month)
  • Gas
  • Cable/internet/satellite
  • Home phone
  • Mobile phones
  • Other contracted services/memberships

Write that total down.  You can reduce your gas expense by simplifying your errands run or by carpooling with a co-worker.  There are many ways to save money on groceries, too.  You can always renegotiate your service packages by negotiating downgraded services or dropping them altogether.

Examine your liquid accounts (read: checking/savings accounts)

How much money, cash available, do you have in the event of an emergency?  If you don’t have anything set aside, you may want to take some time to do an emergency save up before you step away from being a two income family.

You definitely want to be able ensure you have room to save for emergencies and retirement in your new budget too…which means you’ll have to make some pretty deliberate cuts somewhere.
Test Out Living On One Income Before You Take the Leap
The best way to “see” what living on one income would be like is to actually live on one income before you blindly leap.  Take your new one income budget for a test drive so you can work the kinks out of your budget and adjust as you go.

You don’t want to leap from living large to living small overnight.  And know that it just might suck.  Sometimes doing the right thing isn’t always the easy thing…do it anyways.

Are you thinking of transitioning from two incomes to one?  What steps are you planning to take to prepare your budget?

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