Marie and Arry Joseph didn't want to live on one income, at least at first.
Arry, an electrician, lost his job and was out of work for several months, so the Atlanta-area couple lived on her income as a computer analyst. By the time he found steady full-time work again, they were used to their new lifestyle. They continued to live on her paychecks and started to save his, and were quickly "surprised at how much money we had."
"If he had only been laid off for three months, we probably would have gone right back to consuming," said Marie, who blogs about her personal finances as Moneymonk. "We got a lot of practice (saving money) . . . and it taught me how to be frugal."
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Some families choose to live on one income to pay down debt or boost savings. Many opt for single incomes so that one partner can stay home with the kids, start a business or pursue some other passion. For others, including single parents and those who've lost jobs, living on one income is simple necessity.
If you have time to prepare for your single-income status, you can do a lot to reduce your risk, such as:
- Track where your money is going. If you're used to two incomes, it's easier to be sloppy about what you're spending "because you've got that other check coming," as Marie Joseph put it. Switching to one income means you need to be smarter about not wasting what you've got. Online sites such as Mint.com or Wesabe can help you track your spending, or your bank may offer account aggregation services that help you monitor and categorize your spending. Once you see where your money is going, you can make informed decisions about where to cut back.
- Pay off toxic debt. Credit card balances, payday loans and bounced check fees are expensive debts that erode your financial well-being. They're also a sign that you're living beyond your means. Paying off this debt can help teach you the financial discipline you'll need to function on one income. Read "6 steps to dumping toxic debt" for more.
- Build up savings. With credit tight and unemployment high, you have fewer options when something goes wrong. Having a fat emergency fund can help you sleep better at night. Most families should shoot for an emergency fund equal to three months of expenses, but one-income families might want to have twice that. If you're having trouble getting started, read Donna Freedman's "An emergency fund out of thin air."
- Live on one income while you still have two. Many families that have successfully transitioned to one income say they started living on one partner's paycheck before it became necessary. That freed up money to pay down debt and boost savings while giving them time to adjust to a more-frugal lifestyle.
Continued: Don't get buried by debt