Tips for Living on One Income

There are many different reasons that households may decide or end up living on one income instead of two. In these difficult economic times, unfortunate things like job layoffs affect many families. Sometimes there's an elderly or disabled family member who needs to be cared for, and one member of the household must cut back on working hours or quit working altogether in order to do this. Or, in many cases, a couple has decided to start a family and they want to know if it's possible for one spouse to stay home with the children. In still other cases, maybe one spouse is ready to retire while the other will continue working.
No matter what your reasons might be for evaluating the one income vs. two incomes topic, consider the following information when trying to determine whether your household can survive on one income. If you've recently found your household living on one income involuntarily, consider the tips for saving or cutting back.

1. Can you realistically cut back enough on your lifestyle to live on one income? (Or how can you cut back unnecessary expenses if you've started living on one income instead of two?) When children are involved, consider the cost of child care and how this would factor into your situation. If you're evaluating one income vs. two incomes for your household, start by making a budget for each to see if the one income budget is realistic.
2. Do you have an emergency savings fund? It's typically recommended that households have a minimum of 3 months of total expenses socked away in an emergency savings account. This can help you pay for unexpected expenses such as a car or home repair. If you don't have one now while you're living on two incomes, it may not be realistic to expect to build one up on one income.
3. Do you have life insurance on both spouses? Does the spouse who plans to continue working have disability insurance?
4. How easy would it be for the stay-at-home spouse to return to work? The stay-at-home spouse could consider taking periodic online, evening or weekend classes in order to keep job skills current if there was a sudden need to return to the workforce.
5. What benefits (health insurance, 401K retirement plan, dental insurance, company fringe benefits, etc.) might you lose if one spouse quit work? Could you replace these benefits or do without any of them on one income? At a minimum, it's a good idea to have health insurance for the household and disability insurance for the working spouse. Life insurance on both spouses is also very important.
6. Besides a mortgage, are you currently in debt? Do you carry a balance on your credit cards? Do you have a hefty car loan? If so, then it might not be realistic to reduce your income and also try to get out of debt.
7. Where else could you cut back? There may be unnecessary monthly expenses that you discover while developing your budget. You might find significant savings opportunities when you decide what items could be eliminated or reduced in your monthly expenses. Review your budget and determine what items you'd be willing to cut back in order to allow one spouse to quit work.
8. If you can't live financially on one income, it might be possible for one spouse to work part-time or maybe even start a home-based business. Consider these options when evaluating your budget.

If you find your family evaluating the one income vs. two incomes topic, asking yourself these questions will help you to make the best decision. Each situation is unique and what's best for one family may not be best for another. Careful planning can help you and your family make the right decision for you.