How to Live on One Income
Discover simple, must-know steps in this article to learn how to live on one income.
My husband and I have been married for more than 10 years, but during that time we’ve never had two full-time incomes. First I was going to school full-time and working part-time, and then shortly after I graduated he decided to go back to school, so then I was working full-time and he was going to school and working part of the time.
And then our first daughter was born a few months after my husband graduated from college, right around the time he finished the seasonal job he had had, and because I was the one with the full-time, benefited job and was somewhat established in my career by that point, I continued working and he became our stay-at-home parent. We knew we wanted one of us to be home with our children to raise them, and though I would have loved for that person to be me, I’m very grateful that we’re able to make our budget work so that one of us is able to stay home.
So we’ve never had the (what feels to me like) massive earning potential of a two-income family. However, because we have been able to live on one income, we’ve seen the many benefits that come from having one parent be able to be home full-time with our children. (And I’ve been fortunate in that I work for a good employer who has let me work part of the time from home, as well, for which I am very grateful.)
Of course there are what some would call sacrifices that we have chosen to make in order to live this lifestyle, but they have definitely been worth it. And despite living on just one income, we’ve been able to set and reach our financial goals (such as paying off our 15-year mortgage on our modest home close to 10 years early!) by living within our means—spending less than we earn and avoiding debt—and being very intentional about our spending, saving, and investing. And you can too!
If the reason that you are wanting to live on one income is that you would like to be able to stay home with your children (or you would like your spouse to be able to), then from my own personal experience, I would say that any tradeoffs that decision requires are a small price to pay for the overwhelming potential benefits.
Below are 7 must-know steps to take to help ensure that you are successful in your goal to live on one income.
7 Simple Steps to Live on One Income
1. Develop a workable budget based on the income of the working spouse.
A realistic budget or spending plan is an important part of every individual or family’s financial success. And for families living on one income, it is vital because you may not have the extra wiggle room between your income and your expenses that you might if you had two incomes. In order to set your family up for financial success and reach your financial goals, you need to create a plan (known as a budget 😊) and then stick to that plan.
Find out how to create a workable budget here.
2. Distinguish between needs and wants.
Because most people don’t earn enough money to buy everything that they would like to, a crucial part of being an adult is learning to differentiate between needs and wants.
If you are painfully honest with yourself, you’ll likely recognize that much of your spending is for things that you want but not that you truly need. You probably already have a closet full of clothes, a car that can get you around for many years to come, and gadgets and toys and home furnishings that make your home or apartment burst at the seams.
So the reality is that you could probably go a long time without needing to buy anything at all besides food and gas for your car. To break yourself of mindless, needless, or even reckless spending, do a no-spend month. The savings can be dramatic, and the change to your mind-set monumental. Or if that seems too extreme, start with a no-spend week. Learn more about how to do a no-spend challenge.
To help you differentiate between needs and wants, keep this distinction in mind: you need transportation, but you don’t need the newest or the biggest or even the safest SUV on the block. You need shelter, but you don’t need a fancy three-story home with three-car garage within the best school district (even though I admit having a good school is nice). You need food, but you don’t need filet mignon or lobster or the finest cuts of beef and you don’t ever actually need to step foot inside a fast-food joint or restaurant. And you need clothes, but you don’t need designer labels. If you will be content to live in a modest home, drive modest cars, and wear nice but not super trendy clothes, you can definitely afford to live on one good income.
3. Begin reducing your spending now.
As soon as you know that you want to become a one-income family, begin working toward living on one income. Making this shift sooner rather than later is super helpful in a couple of ways. For one thing, it lets you pilot test the major lifestyle change you’re planning to make so that you’ll know what to do and if it’s actually feasible given your current circumstances. And if you determine that it’s not currently feasible, you can work on changing what you need to to make this dream a reality.
And secondly, by living on one income several months before you actually need to, you’ll have a big cushion of extra savings that you can use for unexpected expenses if needed or to help smooth the transition to make this goal of living on one income a reality. Here are some of the major areas where you can look to cut expenses:
- Significantly reduce the amount you spend on buying groceries and eating out. If you tend to eat out a lot or spend a lot on groceries (and chances are that if you’ve been a two-income family you spend a great deal of money in this category), then this is an area where you can make huge changes to win financially.Knowing that money spent on food is spent on something that is fleeting that you eat one minute and is then gone the next, I determined years ago that there are many, many other things I would rather spend my money on or invest my money for.
According to the Bureau of Labor Statistics, in 2015, the average American family spent $3,008 each year on restaurants and takeout. If you instead invested that money every year for 30 years at even an average rate of return of 10 percent (and good growth stock mutual funds can get better returns long-term than that), you would have over $540,000. Doesn’t that just make your takeout start to taste a little stale?For at least the last 10 years we’ve spent less than $300 per year on eating out or takeout. Maybe that seems Draconian, but during that time we’ve also been able to save at least 15% a year toward retirement and, as I mentioned above, we paid off our house in less than 6 years. And we did it on one income. So I think it was worth the tradeoff! 🙂
Because do you know what you have when you have a paid-for house? A six-month emergency fund? And a couple hundred thousand dollars in retirement accounts when you don’t plan to draw on them for at least 20 years? You have financial peace. Read this article to learn more than 50 ways you can cut your grocery bill and this article to find 13 tips to save money eating out.
- Downsize or sell your car(s). If you have expensive cars and car loans, downsize to less expensive cars and get rid of your car loans. (Learn how to go about doing that in this article about getting rid of your car loans.) This, perhaps more than any one other thing, can help you reach your goal of living on one income. And if you can, sell one car, and become a one-car family. We’ve been a one-car family for most of our marriage, and again, it’s helped us to reach our financial goals despite living on one income. Read this article to discover more than 30 ways to slash your transportation costs.
- Look at ways to decrease or offset your housing costs. Another financial decision that we have made that has allowed us to live on one income, with my husband as a stay-at-home parent, is that we live in a modest three-bedroom, 1,300-square foot home. Not only did this keep our mortgage payment lower, but it also has meant lower homeowners insurance, property taxes, and utility expenses, as well.
And now that we have three children, even though having more space would be nice, because we’re committed to staying debt free we’re planning to stay where we are for another five to eight years so that we can buy our next larger, probably somewhat newer and nicer home with cash! #100percentdownplan
If you will commit to living in a smaller and perhaps little bit older home, the savings can be substantial.
One way that you can offset your housing costs is by renting out rooms in your home on Airbnb.com or Booking.com. If you have one or more extra bedrooms in your home (or have a second or vacation home), renting them out on Airbnb, Booking.com, and similar sites can be a great way to earn extra income. We’ve been using Airbnb for the last couple of years for virtually all of our travel accommodations (when we’re not camping), and they’re awesome.
The hosts have been so great, and we’ve really felt welcomed and at home. And of course the savings can be significant! Sign up for Airbnb here and receive $40 off your first stay with them!
And I just have to include a shameless plug for my angel mother, who has been renting out spare rooms in their beautiful southern Utah home (not an affiliate link :D) for the last couple of years. If you’re in the area to play at Lake Powell or hike in one of the beautiful national parks or other scenic areas nearby, look them up!
- Reduce your cell phone and internet bills. Particularly if you have a family smartphone plan with data, the cost can get prohibitive. I know of a family that spends (or maybe spent—I really hope it’s spent) more than $500 a month on their family cell phone plan. That’s as much as some people pay on their mortgage or their rent. It’s crazy.But a smartphone is not a need, it’s a want. And unless you make a really good income, when you spend that much money (or even just a couple of hundred dollars a month) on a cell phone plan and then another $50 to $100 on home internet service, you’re likely harming your overall financial well-being. Is being able to be “connected” 24/7 really worth giving up some of your financial comfort in retirement? I don’t think so.
That’s why we use a very inexpensive but great smartphone service provider, Republic Wireless. And that’s why I also recommend, if you use more than about a GB of data a month (I use way less than that), that you check out Mint Mobile. They have plans that start at less than $20 a month for unlimited data (though speeds are somewhat reduced after the first couple of GBs)—amazing!
*UPDATE*: As of September 2018, we’ve switched to Xfinity Mobile! And the service has been great. If you’re in an area with Xfinity high-speed internet and mobile, you’ve got to check them out! We’re paying an introductory price of $40 per month for our internet (same price as the much slower internet that we used to have from a different provider), and the cell phone plan is potentially virtually free.
Since we’re such light data users (especially given the fact that Xfinity Mobile has free hotspots it seems almost everywhere), we pay only about $3 a month for taxes and fees for each line. (That’s the price if you use less than 100 MB of data per month, which we do; then it’s $12 per GB per month, or $45 per month for unlimited data.) It’s such an awesome deal! And Xfinity Mobile has the same coverage as Verizon, which reportedly has the best cell phone coverage in the U.S.
You do need to sign up for Xfinity internet in order to use Xfinity Mobile, at least initially. You can then drop the internet service if you want, but then you’ll pay an extra $10 per month per line for the mobile service. Interested in signing up? Use this referral code to receive a sign-up reward: 1RQ4SP
- Decrease the amount you spend on entertainment and vacations. Another way that you can reduce your spending in order to live on one income is to decrease your entertainment costs. The great thing is that there are limitless possibilities for free and cheap entertainment.
If you’re serious about living on one income, you can cut your cable or satellite (and even ax your Sling or Netflix subscription), quit going out to movies and concerts and ball games (except the wonderful, free kind), cut back on your drinking and smoking (or cut them out altogether), cut back on vacation and travel spending, and more. If you’re looking to live on one income because of young cherubs in your life, then think of their sweet antics and personalities as entertainment enough. Learn more about cutting your entertainment spending here.
55 Must-Know Tips to Slash Your Grocery Bill in Half!
13 Top Tips to Save Money Eating Out
Eat Free for Your Birthday!
12 Best Tips to Save Money on Entertainment
13 Ways to Slash Your Utility Bill
4. Develop the habit of saving.
It’s important for anyone who really wants to win financially to live below their means—spend less than they earn—so that they have money left over to save and invest.
When you live on one income, though, it’s more important than ever to have a habit of regularly saving. Without a second income to rely on in the face of unexpected problems or emergencies, it’s even more important that you save up to prepare for unexpected and irregular expenses.
These irregular expenses include things like car maintenance and repairs, house maintenance and repairs, repair or replacement of home furnishings and appliances, vacations, Christmas shopping and gift giving, and more.
I recommend that you use Capital One 360 or another bank that allows you to open multiple savings accounts for your emergency fund and for the savings accounts for these other categories. We have been banking with Cap One for 14 years (since the time that they were still ING Direct), and they have been a great bank, even after being acquired by Capital One (which I admit I had my reservations about).
We have more than 10 savings accounts for our different savings goals and irregular expenses (such as our life insurance premiums), and it works great because we never accidentally spend money that was supposed to be allocated for one thing on something else. This also helps us very easily track our progress toward our various financial goals.
In order to save regularly and to make saving a priority, you need to make it an automatic process. One of the best personal finance books that I read years ago when my passion for personal finance was first ignited was The Automatic Millionaire by David Bach. It teaches you how and why to automate your savings and investing to build a safety cushion as well as long-term wealth over time. Setting up an automatic system for saving will make it far more likely that you will build wealth and be able to become financially independent or even retire early!
Learn how to automate your money so that you can save more money and reach your financial goals.
5. Have a substantial emergency fund in place.
If possible, have at least a three- to six-month emergency fund in place before becoming a one-income household. An emergency fund is an essential part of anyone’s overall financial plan, but, as with saving up for unexpected or irregular expenses, for households living on one income, having an adequate emergency fund is even more important.
6. Get (and stay!) out of consumer debt.
If you can, pay off all of your consumer debt and student loans before you become a one-income family. Or do so as soon as you can after. And then determine to stay out of consumer (nonmortgage) debt. This will make it much more likely that you will be able to successfully live on one income long-term, and it will help you to build wealth and achieve financial independence.
Learn how to pay off debt fast!
7. Consider working a part-time job or side hustle from home (or work alternate shifts with your spouse).
I know this article is about living on one income, but I wanted to include this section about earning a second part-time (or even full-time) income from home as another viable option for helping to ensure that ends meet. Here are some possible work-from-home jobs (though there are also others that would work, as well—this isn’t an exhaustive list):
- Become a professional blogger. I love blogging (love blogging—even more than my regular full-time job and even more than my freelance editing and writing) because I get paid to do something that I would do for free—teach people every day how to win with money—and I get to do it from home on my own schedule! I’ve taught volunteer community personal finance classes before, and I love it, but the reach of a blog is virtually limitless. You can literally help countless numbers of people to change their lives and successfully manage their finances. And blogging is also a perfect job because you can set your own hours and work from anywhere that you want to. And the potential for income growth is amazing because of the potential to earn passive income. Really, it’s a dream job! If you’re interested in learning about starting a profitable blog (or a blog just for fun!), check out my free tutorial!
You can learn more about the benefits of blogging here.
And then if you decide blogging would be a great opportunity for you, I recommend the Blog by Number course and ebook by Suzi Whitford to get you started. It’s the course that I took to get started as a newbie blogger. You can complete the course in less than three hours (not all in one sitting, unless you want to! :)) and have an excellent introduction to how to start a blog and how to begin monetizing it in order to earn money.
Learn from a professional blogger who can help you start making money as quickly as possible so that you can start to reach your financial goals and pursue your dreams. Enroll in Blog by Number today!
- Do freelance writing, editing, or proofreading. If you have been trained as a writer or editor, than working from home is a great option. I’ve been editing as my full-time job for more than 14 years now, and I’ve been doing freelance writing and editing for nearly that long, as well. Even before I graduated from college, I had been hired by a company to do freelance writing for them.Being a freelance proofreader is another option. If you love reading and have a good eye for detail, this may be the perfect job for you! If you’re interested in this line of work but don’t have any former training as a proofreader, check out this free introductory 60-minute proofreading online workshop from my friend Caitlyn at Proofread Anywhere. The course has received great reviews!
To find freelance opportunities, check out Upwork or indeed.com.
- Do freelance work in graphic design, translation, transcription, illustration, photography, teaching, and more. These are all great options for freelancing if you have the needed experience.
- Work as an accountant or bookkeeper. If you studied business management or finance or a related field, then this is a natural fit.
- Find work-at-home jobs such as customer service or related jobs. Some companies, such as Jet Blue, have some of their employees permanently work from home in either part-time or full-time positions. To find current job opportunities, check out my favorite job search site, indeed.com.
- Be a virtual assistant. This is a relatively new field, and one where you can develop your skills in one (or more) of several different directions. The pay can be great, and you can take on as much or as little work as you would like in order to work the number of hours that fit your current schedule.If you’re interested in making a great income as a virtual assistant, I recommend the course 30 Days or Less to Virtual Assistant Success, which has excellent reviews. Another good option is Introduction to Running a VA Business, available through Skillshare. And another great option is the course Become a Pinterest VA Today! by Kristin Larsen and Gina Horkey. It will walk you through everything you need to know to be a Pinterest VA. If you love Pinterest, this could be a great job for you!
- Do freelance consulting or coaching. If you work or worked in a job that lends itself to doing so, becoming a consultant or coach in the same field is an excellent fit and can be very lucrative. Put all of that experience and knowledge you gained to good use. Or turn one of your hobbies or passions into a side job by offering consulting or coaching related to that topic. Check out indeed.com for opportunities.
Even though it may require some level of sacrifice for most families to be able to live on one income, the benefits are well worth the cost, especially when they allow the person staying home to care for dependent children or parents or other family members. In my book, those kinds of rewards are priceless!
Invitation to Share
Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!
Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.