I have an intimate relationship with life on one income. I have lived it as a single young man, struggling to make ends meet early in my career. I have lived unemployed while my wife was at work, and I have been employed while my wife stayed home. I have found myself in each situation both voluntarily and involuntarily. So as you read through this article, know that much of this message comes from personal experience.
While both my wife and I now enjoy full-time employment, I cannot honestly say that this arrangement is better. Every living arrangement has its pros and cons. Some days it is, some days it isn’t. When we need to get something like banking done, or all my “free time” after work is eaten up by household chores, the idea of dropping out of the workforce holds a certain appeal.
Aren’t Two Incomes Better Than One?
Humans are funny. Sometimes it seems like no matter how much we have, it is not enough. So for many couples, the idea of getting by on one income seems impossible. After all, according to the Bureau of Labor Statistics, most people born after 1970 have lived their whole lives with the two-earner model being the predominant household demographic.
On its face it seems like a positive development. Women, in particular, have driven this change, and that’s a positive thing for everyone concerned with equality. More people making contributions to the workforce and the economy is an indicator of a prosperous society.
Plus, everyone wants more money. Two is more than one. Therefore, two incomes are better than one. But as anyone who has ever shared a living space knows, happy households require more than just a hefty paycheck. Running a home takes time, and while time is money, the inverse isn’t necessarily true.
After reading this article, you should have a better sense of the financial, mental, and spiritual considerations that guide your decisions on how to live on one income.
The Basics
A successful life on one income boils down to three things:
• Math
• Motivation
• Mental health
You’ll have to do some math (or let a computer do it for you) to discover how to live within your means. Deciding to do that will depend on the motivations driving your decision to live on one income. Perhaps you’re planning for your future. Perhaps you’re planning for your child’s future. No matter the reason, paring down one’s lifestyle to accommodate a decreased household income takes dedication and motivation.
Equal to the financial considerations are personal and social considerations. Are you equipped to handle life at home? If you’re becoming a stay-at-home parent, are you prepared to spend most of your time talking to children instead of adults? Do you have a way to stay engaged and fulfilled without a career?
If you’re thinking of setting one income aside for savings purposes, are you equipped to handle a step back in some standards of living?
In this article, I’ll break down some of the motivations and strategies for how to live on one income. Few things in life offer a one-size-fits-all guarantee, but a few universal truths can help along the way.
When More Feels Like Less
The median household income has risen considerably over the last few decades, but individual wages have not. Therefore, most of the wage increase at the household level has come from adding at least one earner to their shared finances. Most of us have the unfortunate habit of living at the edge of our means, which means the increased earnings fail to eliminate much if any stress when the bills come due.
Compounding the issue, having both partners in a relationship spend some or all day at work can add other expenses. House maintenance, child care, and other elements of everyday life cost money no matter what. Having to work around job schedules can actually increase those costs, or at the very least, make them less convenient.
The Cost of Doing Business
Couples often drop to one income to save money on child care. The math checks out. According to the USDA, raising a child to the age of 17 will cost a middle-income couple, on average, over $233,000. About 16% of that figure – about $37,000 – comes just from the cost of child care. Having a parent available round-the-clock cuts those costs significantly, if not entirely.
But it’s not just the daycare center angle. A stay at home parent also plays roles from interior decorator to psychologist to janitor and about a thousand other jobs in between. All told, Salary.com estimates the worth of a stay at home parent to exceed $160,000 per year – certainly a figure to keep in mind when deciding whether it is “worth it” to ostensibly eliminate one income in a household.
Of course, none of that touches the more difficult to price aspects of stay-at-home parenting. Psychological research since the 1950s has demonstrated the importance of parental presence in developing well-adjusted humans beyond the simple caretaking aspect. More recently, a seminal study on Norwegian children found a significant correlation between the GPA of high school students who grew up with a parent at home until at least the age of 3.
Setting Something Aside
But what about the DINKs? Dual Income No Kids couples earned this moniker in the 1980s, and as more and more couples choose not to have children for financial reasons, the lifestyle has only gained traction in recent years.
Why go down to one income without concerns for child care or college tuition? For one thing, even without children, every household has errands to run. Oil changes, vehicle registrations, banking, and a whole suite of other “life stuff” typically requires someone to take off work. Having one member of the couple solely dedicated to those endeavors can relieve a lot of stress in a relationship.
But perhaps more appealing is the prospect of going from DINKs into DINKERs – Dual Income, No Kids, Early Retirement. Most of us would like to enjoy the fruits of retirement after a lifetime in the working world. Setting one income aside explicitly for the future can help some couples cross the finish line a little earlier.
For those with ambitious bucket lists, this may be worth the sacrifice of living thriftily in their primes. For those with ambitious financial planning, there’s even the enticing possibility of checking items off that bucket list while still in their primes.
The advantage of living on one income while bringing in two is also its flexibility. By its very nature saving and investing makes a more significant difference the earlier you start, meaning smart planning and timely execution can yield big results for even small efforts.
Motley Fool estimates that even one year spent dedicating an income to maxing out a 401k contribution ($18,000 as of 2015) can return more than $266,000 when collected 35 years later in retirement.
The Importance of Budgeting
The unfortunate reality is that living on one income is harder now than it has ever been. The rising cost of living has outpaced inflation. Home prices have risen almost three times faster than inflation. Much of the wage growth of recent decades has been eaten up by added costs from things like cell phone bills, internet access, and rising student loan debt.
None of this should be a barrier to anyone committed to living on one income. It merely means the age-old wisdom of keeping a tidy, manageable budget carries a little extra weight in this day and age.
Every household should keep some form of a budget. Most do, even if they don’t realize it. How often do you check your account balance, or inspect a credit card statement, and had the resulting guilt convince you not to make an unnecessary purpose? If you do that, you’re halfway there.
Analyzing spending is step one in the art and science of budgeting. The critical element here is not to let your emotions guide you. Let the numbers do the talking. Spreadsheet software makes it exceptionally simple to look at your account statements, plug in some numbers, and find reasonable estimates of how much you spend on both fixed costs like rent or a mortgage, and more flexible spending like going out for dinner.
Armed with this knowledge, you can then do a little math to determine what you can afford each month, and what you need to put away.
A Penny Saved
When calculating your monthly cash availability, keep in mind the need to maintain a little savings for emergencies. By definition, these costs are unpredictable, but the standard recommendation is to keep emergency funds on hand that could support six months of expenses.
While it seems obvious, your budget should also allow you to stay ahead of debt payments on things like a mortgage, student loans, or credit card payments. Letting those costs accrue will cause a world of financial pain later, negating much of the benefits of leaving the workforce in the first place. Justin Pritchard at TheBalance.com has the math on how a little extra effort towards paying down debt goes a long way.
Trimming The Fat
If you’re wondering how to live on one income, you might look at the results of that analysis and start sweating under the collar. Recognize that this is a normal response. With a little discipline and a little thoughtfulness, you can make it work. Keep in mind the higher goal. Most households have room to work with, even if it may not feel like it.
Negotiable bills make for low hanging fruit. Cell phone bills, cable, auto insurance, and even medical bills can be talked down with a little bit of tact and guile. Many businesses see it as a worthwhile investment to eat a little profit margin to retain a customer, so they bend a little if pressed.
Five or ten dollars here and there add up, especially over time. Those small sums take the pressure off other parts of your budget and, saved or invested wisely, grow significantly when the time comes to tap into them.
If you can get the same service for a lower price, great, but ultimately, budgeting for a downsized household income is going to require some sacrifice. You may consider cutting the cord from cable in lieu of a streaming service (or two) that come with a lower monthly price tag. A close look at your cell phone bill may reveal data or messaging rates paid for but not needed.
Next up, examine your “fun money” spending. Going out to eat, out to movies, seeing live music, or buying luxury items are some of the things that make life worth living, so don’t try to cut them out entirely. Find a figure you can realistically abide.
According to financial planner Tom Corley, couples planning for the future should plan on 10% or less of their monthly net pay going towards the finer things.
Groceries are a necessity, but savvy couples can find serious savings – and perhaps a slimmer waistline – with a more tactical approach. Keep a grocery list, and adopt the mindset that it is the list, not a list. Much of the excess spending on groceries comes from spur-of-the-moment purchases.
You may also find savings by buying generic where you used to buy name brand, or cutting out a night of red meat in lieu of chicken or a vegetarian meal.
Whether and however you choose to save at the grocery store, keep in mind that food is essential and often a matter of personal preference. Stay realistic when setting your budget. Start with small changes, and gradually step up as you become more comfortable with a new routine.
The Envelope Method
The envelope method has helped countless aspiring budgeters stay disciplined. Take the money for a given budget item out as cash at the beginning of each month, and put it in an envelope marked for that purpose.
For example, every time you want to go out to eat, take some cash out of the “dine out” envelope. When the envelope is empty, stop going out! People feel the pinch a lot more when handing over actual cash. Moreover, it eliminates the need to keep a running total or double-check a spreadsheet when you get home.
Bigger Bites
If negotiating contracted services and cutting down luxury spending still isn’t enough, couples wondering how to live on one income should consider a few more substantial steps. While these are harder decisions to make initially, they can make it much easier to make ends meet than finding small sums on the margins.
Adjusting your income tax withholding brings home a little more money each month. Yes, it means no more fat tax refund check (if you were getting one), but that money makes a bigger difference when it can mitigate a monthly bill or stave off the accumulation of debt.
For an even bigger bite, consider whether your household can get by with just one car (assuming it has more than one). Car payments, registrations, and fuel add up significantly over a calendar year. Without a second commuter, many couples find that proper planning, public transport, and carpooling can make it possible to get by with one less set of wheels in the driveway.
The money from selling the car can supplement leaner parts of the budget while your household makes the adjustment, or rolled into the savings aimed at a child’s college fund or early retirement.
Last but not least, couples really needing to shave down their spending may consider downsizing their home. Selling a more expensive home and moving to a smaller one provides an immediate jolt of cash – perhaps a way to establish that six-month emergency fund – but also saves in the long term with smaller mortgage payments and potentially lower property tax payments.
Side Hustle
Leaving the workforce does not need to mean leaving the whole concept of income behind. Thanks to the development of independent contracting apps like Uber and Lyft, it has become easier than ever to find a little financial breathing room in the gig economy.
The Harvard Business Review estimates 150 million people in the United States and Western Europe have found thriving occupations in “freelance” work. It’s not just driving strangers around, either. Online shops like Etsy make it easy to turn creative, free-time pursuits into modest cash flows, on your own schedule and according to your own desires.
Some of the more old school methods of generating additional income still hold sway in the modern era, too. Renting out a room in your home can drastically defray mortgage payments. A garage sale can serve double-duty in helping you clean and organize your home before a downsizing, or simply garner some cash for the trouble of decluttering.
Part-time jobs may offer more stability than joining the gig economy, and certainly provide longer-term income than a garage sale. Still, they do come with a sacrifice of some of the benefits of single-income living. They almost certainly pay less per hour than whatever career you’ve left behind. But often they also come with lower stress levels and more free time, so depending on the ultimate goal, they may be the best bet.
Take a Test Run
No matter your strategy for how to live on one income, the adjustment will likely provide some challenges. Diving in with both feet can put you in a position you cannot easily undo. If possible, take a month or two living on just one income and see if you can make it work. See what, if any, steps backward in your standard of living the change will require. All the planning and budgeting in the world sometimes fall short of the real experience.
Take note of the stressful elements, and consider how you could change them should you choose to make the situation more permanent. Often, it’s as simple as recognizing the unexpected stressors and acknowledging them. More severe issues may point to a miscalculation in your budget. Either way, finding them before they’re unavoidable will save a world of emotional turmoil later on.
Beyond the Budget
Living on one income demands more than just frugality. The psychological and emotional elements that come along with the stay-at-home life cannot but overstated. Especially for those leaving the workforce, the sudden lack of a paycheck feels like a serious disconnection from society, or at least adulthood.
Many also find that life out of the rat race is a lot more stressful than they anticipated. As Jennifer Pinarski wrote at TodaysParent.com, staying at home doesn’t always feel like a blessing.
No matter how you spend it, every day will have highs and lows. Prepare yourself for those days, and the kinds of situations that can give rise to them, and you can help your household maintain an even keel.
Couples deciding to live on just one income need to have strong communication skills. There will come a time when the stay-at-homer will find themselves feeling a little lost. The paycheck earner needs to know and communicate that their partner is bringing irreplaceable value to the household, because they are.
Sometimes it takes a team to keep the big picture in mind. Living on one income is helping the whole family, both now and in the future.
Conversely, the stay-at-homer needs to know that occasional resentment is a natural response to a tough day at work. Anyone who has ever had any responsibilities knows that it takes a lot of work to keep a house in order. But it’s easy to overlook the status-quo and feel like a partner has been sitting at home doing nothing all day. In turn, the person at home may feel unfairly attacked.
Communicating effectively can go a long way in warding off relationship problems during these times of stress and misunderstanding. Sharing with your partner the day’s activities helps both parties recognize and appreciate the contributions made.
Be able to give each other a break. Just because one partner is at home doesn’t mean they can or should do everything. Find a way to divvy up chores in a mutually agreeable way, and try to build in a “day off” for the stay-at-home partner.
Perhaps the breadwinner will take care of the kids all morning on the weekend, or take over the lion’s share of chores after work. Either way, it’s crucial to find a way for both partners to get the downtime they need.
Thriving in Isolation
Feelings of loneliness and isolation can become overwhelming for those choosing to stay at home. The first step in overcoming those obstacles is becoming aware of them. If you’re reading this right now, you’re doing the right thing. Knowing what lies ahead mentally is just as important as planning for what lies ahead financially.
Jordyn Smith at Lifeasmama.com has some great tips for warding off those demons. No, you might not be a stay-at-home mom, but those same feelings come for anyone who drops out of the workforce, and Jordyn’s advice rings true for a stay-at-home anyone.
Coworkers, even if they’re a drag, provide the kind of social interaction every human being needs. When we leave them behind, it becomes essential to find some way to scratch that itch. For parents, playdates or groups can provide a much-needed outlet where your child can engage with someone else, and you can engage with some adults.
For non-parents, the struggle is a little different, but the needs are the same. Introverts especially may need to make a sincere effort to keep in touch with friends and family.
Volunteering or joining a club can provide a few hours every week of social interaction and all the mental health benefits therein. More importantly, these activities can provide a more tangible feeling of contribution. Bringing value to the community can help you maintain a sense of belonging and mitigate the feelings of isolation.
Beyond the social element, finding a way to stay engaged mentally is critical to mental health when a job no longer provides it. Keeping busy between errands helps everyone feel more human. Take up a new hobby, or perhaps re-engage with an old one you left behind when you joined the workforce.
Growing up, many of us take up a variety of hobbies only to leave them behind in working life. Dust off the instrument in your basement, or buy your first set of art supplies in a long time, and find that activity that keeps your mind sharp.
The Big Picture
Figuring out how to live on one income is difficult. Every living arrangement is different, and while many resources exist to help you on your journey, there will come a time for tough decisions.
Remind yourself often why you made this choice in the first place. For all the challenges, turmoil, and stress faced along the way, when you’re sending a kid off to their dream college or retiring at an early age thanks to expert-level saving skills, they will all have been worth it.