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October 24, 2017
October 24, 2017
In today's society, it's all about the hustle. People are eager to make more money via an extra job or side hustle and the idea of having a stay-at-home parent or spouse is becoming less common.
While there's nothing wrong with wanting to earn more money and have multiple incomes in your household, it's important to ask yourself why you want or need to earn more money. Is it because you're trying to pay down debt fast? Are you trying to keep up with a certain lifestyle?
It's not uncommon for many couples to spend very little time together due to their busy work schedules. That leaves them to become burnt out, irritable, and possibly even sleep deprived. If you throw kids into the mix, they could also have to cope with some of the drawbacks of having two working parents.
If the thought of transitioning to a one-income household has crossed your mind, you can definitely make it a reality. But, you must make some major lifestyle changes. Here are a few steps you should follow in order to make a smooth transition.
Sit down with your partner and make sure this transition is something you both truly want. Decide whose income you will live on and make sure you are both comfortable with it and set realistic expectations.
Also, discuss what the other person's responsibilities will be.
You don't want yourself or your partner to start feeling overworked and unhappy once you make the transition which is why you want to have a clear and transparent conversation before getting all your ducks in a row.
One of the most crucial steps in the beginning stages is to calculate how much money your family needs to live on each month. Once you both decide this is something that you want, you'll need to see if it's actually possible. Add up all your necessary fixed expenses, then start adding up your variable expenses.
Don't forget to include annual expenses, debt payments, and savings contributions
Create a new budget based on these numbers and base it on the lifestyle you'll need to adopt instead of the lifestyle you currently have. I'll explain more on this later.
Transitioning to a one-income household will make you more vulnerable to unexpected expenses. This is why it's best to pay down as much debt as you can and focus on boosting your emergency fund before you make the switch.
Try to set a goal date for when your household will officially start living on one income. Decide where you want your finances to be at that time. Would you like all your credit card debt paid off by the time you make the transition? Would you need a much larger emergency fund?
Since you'll only be relying on a single income, try to beef up your emergency fund to cover at least 8-12 months of expenses. That way, you won't be completely blindsided by any financial surprises and you'll have plenty of time to recover if you are hit with an emergency.
Another important topic of discussion should be how you'll replace any benefits you might lose when your partner leaves their job. Realize that your medical, vision and dental coverage may increase if you were relying on your spouse's employer for assistance.
Research some other options and see if you can even replace one of your older expenses to supplement the costs.
For example, let's say a couple with two kids wants to become a one-income household. With one parent now at home, there won't be a need to pay for childcare anymore but the costs of medical coverage may increase so the couple can shift money to that priority now.
You may also want to lower some of your coverage to cut costs and eliminate stress.
This is probably the most important step. If you run the numbers and realize you'd be more in a budget deficit (more money going out than coming in) if you became a one-income household, don't write the idea off completely.
You'll definitely need to make some lifestyle adjustments and lower your expenses in order to make it work. Track your spending to see where all your money is going and I'm sure you'll find some unnecessary expenses you can cut.
You might have to cut your gym membership, dine out less, cut down on vacationing, cut out cable, or simply find more free and cheap things to do for entertainment. Try switching to Straight Talk to save on your cell phone bill, or sign up for Hulu to watch your favorite shows instead of paying for cable.
You may even find it beneficial to make more large-scale changes like downsizing your home or becoming a one-car household determining on how bad you want to make this transition.
When it comes to cutting your expenses and making sacrifices, think about what you'll gain in return and whether it will be worth it. You may want to stay home and homeschool your kids or simply spend more time with your family. While your household income would be cut in half, you may find that your life becomes less stressful because you'll have fewer expenses to keep up with.
Before you fully commit to becoming a one-income household, test it out for a full month. This is the most secure way to ensure your family will be okay with the switch since before you actually dive in and make it official.
Make note of any noticeable changes or issues and carefully weigh the pros and cons of the experience.
There's no right or wrong decision when it comes to being a two or one-income household but it all comes down to your wants, needs, and situation. You can most-likely feel happy and balanced with either situation. Ultimately, you have to make the best decision for you and realize that it's a process that involves several steps before jumping in head first.