Why We Love Living on One Income (And You Should, Too!)
More than 200 million Americans – six out of 10 – are living paycheck to paycheck, or worse; according to a recent LendingClub research. Your neighbors, friends, community members, and relatives are financially unstable and struggling to make ends meet.
Are you and your partner looking for ways to reduce your monthly expenses, save money, and reach financial independence? Have you ever considered what it would be like living on one income?
Living on one salary, in a two-income household, can bring huge financial and emotional benefits that have been enjoyed by many couples. With careful planning, aligned with your money goals, stretching how far one paycheck can go may lead to an easier, more economical lifestyle.
In this blog post, we’ll explain why we love living on one income (and why you should consider doing so too!). Find out how managing with just one salary can help you free money for your emergency savings account, provide needed flexibility in a relationship, improve job satisfaction, and create a better work/life balance.
We're sharing some actionable tips that you can use if you want to try them yourself. Read on to find out why this strategy works so remarkably well.
Table of Contents
- What does “living on one income” mean?
- Is it possible to live on a single income?
- How much income should you live on?
- Understand the benefits
- Key steps for one-income household
- Build a realistic budget
- Consolidate your debt
- Cut living expenses
- Grow your emergency fund
- Save for big goals
- Start the process slowly
- Saving money for FIRE
- What is the 50/30/20 budget rule?
- Final words
- More tips for your savings account
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What does “living on one income” mean?
Living on one income means that a household is only relying on a single source of income to cover their expenses and living costs.
Whilst the angle of this article is to illustrate how two-income couples can choose to start saving their second salary; sadly some will be forced to rely on one income only after a job loss or any other obstacle that life throws at them.
Whether it is part of their savings plan or imposed upon them, dual-income families make budgeting choices to ensure that all bills are covered, while trying to save money whenever possible. This assumes that one working spouse takes over as the primary wage earner for the household.
This discipline can help families build financial security and stability without having to worry about going into debt. Furthermore, it can allow for more flexibility in terms of job opportunities as well as enable more time for leisure activities as a family.
Is it possible to live on a single income?
Yes, it is possible to live on one salary for some people; and it isn't necessarily easier for those with higher household income. Couples without children or those living in lower-cost-of-living areas may have fewer difficulties saving their second income.
The key is careful planning and budgeting, setting realistic goals and expectations, and making sure to allocate enough money for saving and investing. With the right mindset and discipline, living on one income can be more freeing than relying on two salaries.
Initially, most will see this objective as unattainable; after all, working is more of a necessity than a choice for many people. But, take a moment to calculate your savings rate (free templates here), and consider putting a little more money away each month.
However, being a two-income couple doesn't automatically mean extra money to save. 57% of Americans can’t afford a $1,000 emergency expense, says a new report. If you are currently unable to save any money, all is not lost, as we explain below.
Additionally, living on one income allows couples to focus more time and energy on family life or pursuing other activities they enjoy outside of work. Ultimately, living on a single salary requires commitment but with careful management and clear goals, people can make it work for them.
How much income should you live on?
When it comes to deciding how much income you should live on, it's important to take into consideration your financial situation and reasons for doing so.
Everyone's situation is unique, so there is no one-size-fits-all answer. Generally speaking, however, it's a good idea to aim to manage your spending with what's known as the 50/30/20 budget rule.
Another way to think about this is by considering the amount of money you need for basic living expenses each month. Start by making a new budget for all your essential expenses such as housing costs, food, car payments, health insurance, and child care for example.
If the income of one spouse can cover these expenses, you're a step closer to succeeding as a one-income household.
No matter what level of income you are living on, your spending habits must be sustainable over time – meaning that if anything changes in your life (such as job loss) you would still have enough money saved up to cover all necessary expenses until another source of revenue is found. Living within your means is a great way to ensure financial stability now and in the future.
Related Article: How Much Cash Should I Have On Hand?
Understand the benefits
Having dual incomes should already be considered a privilege; make the most of it and prepare ahead.
Families who can live on one income will boost their savings, fill their emergency fund, eliminate credit card debt, and grow their retirement accounts.
This concept offers flexibility and can be tailored to your own income family. You may choose to use the higher salary for your monthly expenses, then save and invest the second income.
Those with more debt could not possibly live on one income. Working on spending cuts and trying to save 5-10% of your combined gross income would already be a huge step forward.
In tough economic climates, job security is not often guaranteed, making it all the more important to plan for alternative sources of income.
Any uncertainty would not weigh on you as much if you already live on one income.
Key steps for one-income household
As with any major project, it becomes easier when you break it down into smaller categories of achievable milestones. It is up to you to decide on your timeframe or enlist the help of a financial advisor.
Build a realistic budget
By creating a budget based solely on one entire income, individuals can gain greater control of their finances while working towards long-term financial security.
Living on one income might be hard, but it is possible if you are careful with how much money you spend each month. This cannot be achieved overnight though, work progressively towards the goal. Whilst you might need to adjust your own life and be more frugal, pay attention to celebrate your progress.
Consolidate your debt
Before attempting to live on one income, it is important to consider consolidating your debt, which can help make it easier to manage and pay off your debts. This process involves taking out a loan to pay off multiple smaller loans or credit card balances, leaving you with just one direct deposit payment each month.
High-interest debt is one point often overlooked when looking at your expenses. You may know your monthly repayment amount, but do you know the level of interest you pay monthly?
Ultimately, if done right, consolidating your debt can provide financial relief and get you closer to living on one income.
Cut living expenses
When was the last time you went through your bank statements? Knowing how much there is in your checking account doesn't mean you are aware of your spending!
From stopping a monthly streaming subscription to selling your vehicle and using only one car, for example, take an hour once to review what you spend your money on.
Reducing your daily expenses and cutting back on unnecessary purchases will help free up money that can be saved for future goals or used to build your emergency fund.
Grow your emergency fund
An emergency fund is an amount of money set aside in dedicated savings or checking account that you utilize to pay for unforeseen needs. This could be anything from car repairs to pet ill health or any family emergency.
The goal of an emergency fund is to save up enough money so that you can cover these unexpected costs without going into debt. Ideally, you want to keep at least three to six months' worth of living expenses in your bank account.
If you're keen to take on the challenge of living on one income, why not use the second salary to top up your emergency funds, before moving on to the next steps?
Save for big goals
We all have dreams, but rarely have the cash to finance them! By setting aside money specifically for these large expenses, you can ensure that they will be covered when the time comes without having to spend your entire income or take out loans.
It is possible to save enough money over time so that you can enjoy the things you want while still living on one income.
Start the process slowly
If you're currently on two incomes, can you immediately cut spend and save one in full next month? Probably not.
Living on one income can be done if you take the time to do it right. The key is to start the process slowly and build it up over time. This will allow you to adjust your lifestyle accordingly while still having enough money left over for other expenses or savings goals.
Saving money for FIRE
Living on one income can be a very effective way to help you reach your Financial Independence Retire Early (FIRE) goals.
By creating a budget based solely on one entire income and consolidating debt, reducing spending, growing emergency funds, setting aside cash reserves for large purchases, and starting the process slowly, individuals can gain greater control of their finances while working towards long-term financial security.
This will enable them to save more each month toward their FIRE plan. With patience and dedication, living on one income could become a reality that helps pave the way for early retirement!
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What is the 50/30/20 budget rule?
The concept of the 50 30 20 budgeting rule is pretty simple. You divide your after-tax income into three different categories:
50% for Necessities/Needs
30% for Wants
20% for Savings/Paying Off Debt
The 50-30-20 budgeting method is great to develop saving habits. Full illustration and example in the article How to Budget your Money more Efficiently?
Now that you’ve learned how living off one income can be beneficial, it is time to take decisive action to make it a reality.
Living on one paycheck will require substantial planning and persistence. But by walking this path with faith and hope, you and your partner can set yourselves up for brighter financial days ahead.
Start channeling your energy into mindful spending, smart planning, and conscious saving. Find resources that will help guide you on every step of your journey. From budgeting to investments – take the small changes today so you can lead a happier life tomorrow!
More tips for your savings account
Take control of your financial future. We have found the top companies in the personal finance space and the most helpful tools that offer you practical strategies on budgeting, saving, investing, and more.
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Useful articles for the whole family:
Reduce spending with Monthly Savings: It's Not as Difficult as You Think
Find inspiration from those who managed to retire early in the Best Personal Finance Podcasts to Listen To
Start your own business finding The Best Passive Income Investments
Reach your savings goal with help from an Independent Financial Advisor
No Financial Advice. This article does not provide financial advice and has been prepared without taking into account any person’s investment objectives, financial situation, or particular needs.