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It can be difficult to transition from a two income to a one income household. Sometimes the decision to live off one income is a continuous choice and other time it is not a choice at all.
Maybe you’re are thinking of transitioning to a one income family because you want to stay home and raise your children. Or you just heard that your company is going through financial hardship and will be laying off workers.
Whether it is a decision you have made for your lifestyles or one that you had no control of; there are things you can do to prepare and make the best of the situation.
In my eyes, there are three major losses with the loss of one income. There’s obviously less money coming in. There is also the loss of benefits, health insurance being the biggest, followed by losing any retirement benefits you may be getting.
Transitioning into a one income household
Calculating your losses
The first thing you must do is calculate how much money you are actually losing by going to a one income household.
First and foremost, how much money coming in will be lost?
If you are getting free or cheap health insurance through your employer, you need to figure out how much it is going to cost to replace. You do not want to go without health insurance, this would be a very bad financial move.
Usually, the least expensive option is to jump on your partner’s insurance plan, but not always depending on the type of options that are offered. You should comparison shop to make sure you are properly covered with the least expensive payout.
What other employee benefits will you be losing by transitioning to a one income household? Besides health insurance, your 401 K retirement plan is going to be the second biggest loss, of course, this is only if your employer was matching your contributions. If they were not, then you really are not losing out here. You just need to consider how much you will need to come out of your budget to replace your own contribution.
Then, of course, there is the loss of income. But there are a few other things you need to consider, like how much you will be saving by not working outside the home. Here is a list of possible savings you will realize by staying home.
- Child Care
- Car Maintenance and fuel
- Workweek lunches
- Possibly a car payment & insurance premium
- Workplace Attire
- Take out (because you were too busy to cook)
Depending on your situation, these may not all apply to you. On the other hand, there may also be more than you can add to this list as well.
So, the formula is pretty simple, add the amount of money you will be losing from your employee benefits to you lost salary then subtract the amount of money you are saving by staying home.
+ Health Insurance
+ Employer’s retirement contribution
+ Any other lost benefit you will now need to pay for
+ Lost Income (take-home pay)
– Money Saved from not working outside the home
This will equal your true loss of income.
Closing the lost income gap
Now that you know how much you are truly losing by moving to a one income household, it’ll be much easier for you to make adjustments to compensate for it.
The two ways you can compensate for your true lost income First by saving money on your monthly expenses and second, by earning extra income from home. A combination of both may be the way to go.
Saving money on monthly expenses
There are many ways you can save even more money on your monthly budget now that you do not work outside of the home. Go through every single item on your budget and see where you can save money because you are now home.
The number one item on your budget that is the most flexible is your grocery budget. You can truly cut the amount of money you spend on groceries in half by meal planning, shopping sales, and couponing among many other ways. Read “How I Slashed My Grocery Budget in Half” to see how I did it.
Other ways to cut budget expenses
- Shop for cheaper insurance or check rates on bundled insurance
- Cut back on your entertainment or fun money budget
- Cut back on cable services or replace the cable with cheaper alternatives like a digital antenna or Roku Steaming
- Build a gift closet to save money during the holidays and other occasions
- Save money on kids clothing
- Getting rid of your landline if you both have cell phones
- Switching to a cheaper cell phone plan/provider
- Buying generic instead of name brand
- Check into prescription mail order programs
- Start couponing and using money saving apps
- Cancel unnecessary subscription services and memberships
- Find ways to reduce energy consumption
- Grow a garden to save money on vegetables and herbs
- Restore or repurpose household items
- DIY whenever you can
- Replace disposable with reusable products
Read 101 Easy Money Saving Tips for more tips.
Earning money from home
Once you have gone through your entire budget and have done all you can to save money by reducing your spending, you may still be short in closing the gap of lost income. If so, then you need to look into working from home to make ends meet.
There are plenty of ways you can earn money from home working part-time. The great thing about this is that you are still contributing to your family’s income but you can work on your own schedule.
Below are some ideas to help you start earning money at home
- Start a blog – Read How to Start a Blog – Step by Step Guide
- Sell on Amazon or eBay – Read How to Earn Money Selling on Amazon
- Complete surveys – Read How to Earn Money Selling on Amazon
- Sell items from around your home – Read Cash in on Clutter for more information
- Sell product with your designs on sites like Zazzle and Cafe Press
- Affiliate marketing – Read How to Earn Passive Income with Pinterest
- Sell your outgrown children’s clothing on sites like ThredUp and Swap
- Sell crafts on Etsy
- Offer services on sites like Upwork
Preparing for the transition
Not everyone has the luxury of having time to prepare to live on one income, however; if the decision to transitioning to a one income household is intentional, there are many things that you can do now so you are better prepared.
Start living like you are already a one income household now. This will help you knock some of these things off your to-do list; plus, it will give your family a trial run on how things will change and if you can truly stick to all the budget cuts you are planning. Use the extra money to pay off any debts that you may have then sock away as much as you can in an emergency fund.
Living on one income is possible for most families, it just takes some intentional planning and cutting out unnecessary costs. Are you thinking about transitioning to a one income household? Please leave a comment to share how you are preparing.