It’s an interesting thought. With the state of the economy today, I know of a few families who have been forced to live on one income, involuntarily. But for those that haven’t been, could you live on half your income or become a one-income family?
There are always certain things you get used to and wouldn’t want to part with unless you have to. But what if you did have to? It’s a great and worthwhile exercise to go through as a couple, to see how well would you survive financially in the case of an emergency, a sudden job loss, or even preparing for a new baby.
Before we had our first child, my wife and I were very close to saving half of our income and we easily could have, but we also loved travelling and had just put a downpayment on a house. Since then, although our travels have come to halt (other than the odd short road trip), having a child has also come with other expenses. My wife is self-employed and we thought having a child wouldn’t change all that much in her business. Ha! The amount of time she’s been able to dedicate to billable hours has fallen to less than half. I also took a pay cut a couple of years before that, to be closer to home. So although we’re not quite a one-income family, we are comfortably saving about 30% of our incomes right now.
No one said it was easy
But the question of course, now becomes, could we still save 50%? Absolutely! I’m not saying it would be easy, but entirely possibly. While I realize, that while saving half your income may sound easy for some, it’s a much loftier goal for others. It becomes much tougher when you have:
Low income. It’s much harder to save half your income if your income isn’t that high, to begin with. A couple going from $200,000 a year of household income to $100,000 will have a lot easier time, than a family going from $80,000 to live on a $40,000/yr household budget.
Too many debts and/or bad spending habits. It’s much harder to get control of any savings if all your doing is paying interest on your debts or a mortgage you really can’t afford.
Of course, these can all be changed. We can change our spending habits, reduce our debts and find ways to earn more income. I’ve found it’s a lot easier to save than it is to earn more. But either way, living on one income, opens up a world of possibilities. While one income could be used to pay all your bills, the other half may be used to pay down debt, your mortgage, invest, plan for a new baby, or plan for early retirement.
Exercising your budget
This might seem obvious to some, but before you attempt anything like this, it’s important to find out where you stand. Make sure you can cover all your necessary expenses. This is not about living off of canned soup for a year. Look at your last three months and start planning.
Get out a pen a paper and jot down all your monthly savings. From bank accounts and retirement accounts to any investments, you may have. I also consider any ‘extra’ money beyond your minimum put towards debt repayment and mortgage payments as savings as well. Because in the case of an emergency, you can always cut back if you needed to.
Subtract your total family savings from your net (after-tax) income (usually from the higher-income earner). I say from the higher-income earner because if the higher-income earner were to lose their job, the lower-income earner would need to be able to cover your family’s expenses for each month.
Look at things that you would be willing to cut, temporarily, if you had to. I know if it came down to it, we could probably live without cable (there’s still plenty of free over-the-air stations), my home phone (although we would probably still need to keep one cell phone and our internet for job seeking, we could definitely afford to downgrade our plans). The fact is there are plenty of places that you can find savings.
And if you still can’t find enough savings, it might be time to look at increasing your current income or look for other ways to earn extra income on the side.
If this seems radical or hard to wrap your brain around making such a change, try becoming a one-income family for just a month, once or twice a year, and you’ll be amazed at how much you can quickly save. You may even find you’ll think about your spending in a whole new way.
As I said before, there are always certain luxuries that we would never want to part with and I realize that this may not be for everyone. Not everyone wants to be a one-income family. But if some unforeseen circumstances forced you to, could you? Do you already live on one income? How do you make it work?