Many families have been faced with the reality of transitioning from a fairly comfortable lifestyle on two incomes, to one that seems almost unbearable because one partner as either lost their job or has let it go because of health reasons or maybe to take care of relatives or young children. Whatever the reason behind the scenario the situation is the same; the need to either fill the gaping income gap or to adjust to lower levels of expenditure without feeling like everyday is filled with sacrifice.
Take a look at the 5 following steps for some insight on what every family who has to move from two incomes down to only one should consider:
1. Adjust Your Budget
The first thing to do is to adjust your budget to reflect your new situation. Your budgeted income should definitely match new reality but your expenses also need to be reworked. There may be some expense items that can be removed completely, such as the cost of babysitting or even transportation costs of getting to work. The next step is to find ways to cut down on ordinary expense items like utilities and the food bill.
2. Get Serious About Emergency Savings
When you depend on only one income your risk is actually higher therefore your emergency fund needs to be secure and sufficient. If you are lacking in this area, make a point to start transferring a standard amount every month to build your savings up to a satisfactory level.
3. Reassess Your Life and Health Insurance Coverage
In a similar vein, living on one income means that the burden of health care costs fall on the shoulders of the single breadwinner. In the event that this person is the one that gets ill or dies, the family will be left to pick up the pieces of their financial ruin.
Insurance can significantly reduce the fear associated with the likelihood of this happening. Every member of the family should have sufficient health insurance coverage, but this is detrimental for the income earner simply because the financial loss stands to be much greater.
4. Get Rid of Debt
Interest expense can become oppressive and all-consuming if left unattended, especially if your debt is mainly on high-interest credit cards. Coming up with a strategy to pay down balances on outstanding debt obligations can help to free up extra money that would go towards debt installments. This is one way to find excess cash in even the tightest budget. By getting rid of payments one-by-one and not replacing them with new debt you can find your way to financial freedom and eventually be able to save and invest instead.
5. Consider Working from Home
Just because you no longer have your traditional job doesn’t mean you need to stop earning any income at all. There are several ways to make money from the comfort of your home. You can start an online business, offer tutoring services or find some other way to use your experience and knowledge to start your own business.
Moving from two incomes to one doesn’t have to be the end of the world. In fact, if you have the right attitude, you can use your new circumstances to emerge even better off than you were before.