Living on one income can be a conscious choice, such as where a couple decides that one partner will stay at home to look after the children. Or it can be an enforced (and hopefully temporary) position, where one partner has been made redundant. However, whether forced or voluntary, there’s no doubt that living on one income can be financially challenging.
According to the families.com website, it is estimated that around one in five married couples are one income households. Whilst this may be well down on our parents’ and grandparents’ generations, it still represents a significant proportion of households who face the challenge of feeding, clothing, and schooling their kids, as well as paying all the usual bills and having something left over for entertainment.
To be successful at living on one income requires discipline, planning, shared understanding and commitment, and a little creativity. As we go on to the explore financial tips that can help single income households, it’s worth pointing out that many of the tips are also applicable for dual income households; it’s just that the financial imperative to have a lean budget will be more pronounced where only one partner is bringing in a salary.
Tips for living on one income:
1. Set up a budget and make sure it includes spending targets:
When there are two incomes coming in, there’s a bit more leeway to be lackadaisical in terms of controlling spending. However, such luxuries quickly dissipate when faced with the challenge of funding all of life’s costs from one income. The key to controlling spending is always to analyze your existing costs, set targets for reducing them, and then monitor how you’re doing against your targets on an ongoing basis.
The prospect of having to set up a budget is sometimes daunting (probably because the term has the whiff of banking jargon about it) but those three steps are really all it entails and you don’t need to be a mathematical genius or to have access to anything more sophisticated than a spreadsheet.
You can use your recent bank statements to identify your regular costs and then break down the costs into spend categories. For example, you will have categories such as Groceries, Mortgage/Rent, Gas/Electricty, Petrol/Travel, and Entertainment.
Reviewing current spending patterns nearly always helps identify areas where we can make fairly significant cost reductions. In some cases, it may just be a case of spending more smartly, such as doing a big weekly shop in a low cost supermarket rather than buying in a more ad hoc fashion from your local shop. In other cases, it may involve removing spend that delivers very little value. For example, if you are paying lots of money for a monthly gym membership that you’re not using, then it’s a no brainer to cull that cost.
Setting spend targets is vital as it serves to provide focus in our ongoing purchase activity and helps to ensure that your household continues to live within its means.
2. Ensure everyone has bought into your household budget:
Your ability to make a single income budget work is highly dependent upon everyone understanding the financial constraints and doing their bit to make your plan work. Communication is vital here, so that family members know what the budget is, why it’s important, and what they can do to help make it work.
3. Make sure you’ve taken advantage of all funding support that you are entitled to:
Parents qualify for child tax credits and child allowance but you do need to apply for these and fill in forms in order to start receiving the payments. The amounts involved won’t fully compensate for the loss of a full-time income for stay-at-home mums or dads but are certainly worth taking advantage of. In the UK, the government also contributes money towards a Child Trust Fund for each kid that you have.
If you or your partner has been made redundant, then you should qualify for unemployment benefit, provided that you are actively seeking new employment. Again, it’s up to you to be proactive and make sure that you get the money that you are entitled to.
For many households, the need to live on just one income will probably be a temporary situation. The plan may be for the other partner to return to work once the kids reach school age or, in the case of redundancy, new employment opportunities may soon present themselves. However, whether it’s a temporary or permanent arrangement, the key to making a single income work is to remain disciplined in your approach to spending. Hopefully, by running a lean budget and spending smartly, you will be able to cover all your costs and still have some money left over to spend on the things that make life so enjoyable.
Sources:
http://marriage.families.com/blog/dual-income-blessing-or-curse