Strategies for Couples Looking to Live on One Income

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You may be looking to spend more time with the kids, or you maybe you or your spouse needs to take care of a family member or do more work around the house. Whatever your reason may be, you and your spouse might be planning to live on one income.

Living on one income may also occur when one spouse is starting a business and may not have any income from it in the beginning months. 

Whichever reason you and your spouse have, it makes sense to prepare for living on one income and taking measures to maximize how much money you save. Losing one of your incomes, whether temporarily or permanently, means your budget may be tighter, but you may be benefiting in other ways.

In this article, we’re going to discuss how you and your spouse can live on one income. It may be a bit scary at first to lose an income, but tackling the situation smartly will ease the transition.

Be Prepared to Live on One Income

If you and your spouse are both currently working, then it makes sense that the two of you make preparations to live on one income before one of you leaves their job. This involves determining how much income you'll need to live on a single income and which responsibilities each person will have when one person is staying at home.

You can think of it as: what will the person at home do to ensure that they're contributing in a non-financial way. This is most commonly taking care of the kids, but it could be taking care of a family member, starting a new endeavor, going back to school, and more.

Double-check your budget. Will you have enough to get by when you eliminate one of your incomes? Do you have enough money in your bank accounts to cover any short term expenses while you adjust to single income living? These are things to ask yourselves before living on one income.

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Determine How You Will Manage Your Money

When you and your spouse decide that one of you will work and the other will stay at home full time, it's important to make sure you know how the two of you will manage your money. Becoming a single income family can change a lot in your dynamics. Being on the same page financially will help ensure a smoother transition from multiple incomes to one income.

You'll need to stay on top of your finances. One way to manage your money is to automate your finances as much as you can. That way, neither of you will have to micromanage. Your bills will be set to autopay, and you'll save and invest money with each paycheck that comes in.

Another step the two of you can take to do well on one income is to have the stay-at-home spouse take care of the finances. That way, while one spouse works, the other can be the homemaker and manage the money. One doesn't have to be a personal finance guru to manage the money, but reading personal finance books and blogs is a great way to sharpen your skills.

Create Your Budget Around One Income

If you've created a budget in the past, then creating a budget around one income will be somewhat easier, as you'll already have most of your income and expenses filled in. The first step to creating a budget for one income is to remove the spouse's income that will be leaving work.

This will give you new numbers. You'll likely see a sharp drop in how much money you'll have leftover each month. However, now you can start removing expenses that are a result of you both working. An example of this might be childcare costs, specifically, if the spouse leaving work will now be a stay-at-home parent.

Once you've come up with a budget where you know how much you're making and how much you're spending, tweak further such that you're still in the green each month. Ensure that you are, in fact, in the green before making the final decision to have one spouse leave work. If this seems difficult, then it's possible that one of the two of you could take on a temporary side hustle or part-time gig as you transition to life on a single income.

Live Within Your Means

Quite arguably, one of the best ways to become financially independent is to live within your means or far below your means. This means always spending much less than you are making. One strategy is to “live like you're broke.”

Living like you're broke means regardless of how much money you make means always assuming you don't have any money saved and/or might not have money next month. This broke mentality means you'll maximize your savings because you tell yourself that you need money all the time.

Does this mean you can't have fun once in a while? Of course not. Once in a while, you and your spouse should have a date night, go on a vacation, or spend money on something that makes you feel good.

Living within your means simply means not swiping your credit card without thinking about it and not spending money left and right when you're only earning so much.

Increase Your Emergency Fund

Many experts agree that one's emergency fund should be three to six months of living expenses, saved in a high-yield savings account. When deciding to live on a single income, it makes sense to increase your emergency fund to six months' worth of living expenses to mitigate any financial issues that might come up, such as an unforeseen expense or in the event your one income is lost unexpectedly.

To increase your emergency fund to six months of living expenses quickly, live on as little as you can while you still have two incomes and use all of your extra money to boost your fund. If you and your spouse are paid biweekly, consider using one of the month's paychecks on bills and the other paycheck to boost your emergency fund.

Additionally, you can take on a temporary side gig to quickly add money to your emergency fund. The bottom line is, you want to bolster your way to six months of living expenses as quickly as possible so that when you live on one income, you're cushioned from a mishap.

Pay Off All High Interest Debt

Paying off high interest debt will help you maximize your savings and have more money left over each month. High interest debt especially includes credit card debt, but it may also include a personal loan or a high interest student loan or auto loan. 

To pay off high interest debt, do similar as you did to build your emergency fund. Use one of you and your spouse's monthly paychecks to pay your bills and the other to pay down debt. In this situation, the debt avalanche method may work well, which is when you first apply the minimum payments to each of your debts, followed by applying all of your money towards the debt with the highest APR.

Repeat the debt avalanche method until you can pay off your highest interest debts. You don't need to be debt-free to live on one income, but at least being out of credit card debt will make the transition that much easier.

Save Money on Common Living Expenses

When budgeting to do well on one income, it makes sense to cut back on as many of your common living expenses as possible. Some of the most common living expenses that most families can lower include:

Some living expenses can be lowered simply by making a phone call and negotiating your bill. That said, not everyone is comfortable calling up companies to talk about a rate reduction.

If making phone calls makes you uneasy, use the app Trim to automatically negotiate your bills and cancel your unused subscriptions for you. 

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Use Discount Apps and Coupons to Save on Groceries

It never hurts to save at the grocery store. With the average family of 4 spending around $900 per month on groceries, it makes sense to find ways to spend less when buying food. An app like Ibotta can help you save on everyday purchases. Ibotta has regular specials at dozens of supermarkets and retail stores. You can check in advance to see where you can apply a discount, or you can scan your receipt after you shop. Ibotta will then give you cash back.

Also, consider using coupons to save money on groceries. You don't even need to clip coupons anymore. Most coupons are available via a coupon app like Ibotta or your store's website.

When you're looking to live on one income, cutting your grocery bill by even 15%, or around $145, can go a long way over 12 months.

Use Only One Car or Shop for Used Cars

One way to do well on a single income is to cut back on transportation costs. You can do this by owning one car or by shopping for preowned and used cars. New cars lose up to 20% of their value within the first year that they’re owned. That means a $30,000 car may only be worth $24,000 after the first year. Consider that when making the decision to buy your next car and think about buying a certified pre-owned or used car instead of a new car.

The average monthly car payment for a new car in 2018 was $530. Likewise, the average monthly car payment for a used car in 2018 was $381. Using averages, you can see that there's a savings of approximately $150 per month or $1800 per year when you buy used. What could you do with an extra $1800 each year?

Spend Time Together on Low-Cost Activities and Experiences

When you live with one income, it makes sense to spend time together on experiences more than spending money on things. Finding low-cost activities to do with one another and your family can be the perfect way to have fun while on a budget.

By spending time together on low-cost activities, you can reduce discretionary spending while still having family fun time.

Some great low-cost activities include:

  • Hiking
  • Board Games
  • Video Games
  • Reading
  • Cooking/Baking
  • Arts and Crafts
  • Watch Movies and Shows

When you find activities to do for fun and save money at the same time, you'll be much more successful with a single income.

Adopt a Frugal Mindset

Adopting a frugal mindset will help you do well on one income. This doesn't mean you and your spouse have to be cheap, however. Being frugal means spending money on quality items that you need versus every little thing that you want. It means ordering less when you go out to eat but still tipping well.

When you adopt a frugal mindset, you're focusing more on your needs and less on your wants. You still make room for fun, but you're more aware of how much you're spending.

Living frugally is a great way to save a lot of money. You’ll start finding ways to enjoy yourself that costs less and you’ll change your shopping habits completely. This in turn will allow you to have more money.

Start a Business or Side Hustle

It’s possible that when you live on one income that it becomes difficult to reach your financial goals. In this case, the spouse who stays at home could consider a side hustle or business that they can do from home. This could be something like freelancing, blogging, babysitting, or finding a job that they can do from home.

There are many side hustles that a stay-at-home spouse can do to help earn some extra cash. If needed either you or your spouse can get a stay-at-home job as well.

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Continue to Save Money

Money may be tighter when there’s only one income in the household, so continuing to save money makes sense. Treating you and your spouse as an expense will allow you to save money before you pay your bills. This way, you save before you spend instead of spending before you save.

Determine an amount you can save each month or with each paycheck and set up a transfer to move that money to a savings account, towards a debt payment, or towards an investment account. Essentially, take the money out of your checking account so that you aren’t tempted to spend it. Automating this process makes things even easier.

Plan Your Meals

Meal planning is a great way to both save money and reduce stress around mealtime. When you plan your meals, you’ll know exactly what to buy at the grocery store and you’ll waste less food. 

Create a weekly meal plan for yourself. This will make sure you – and your family – always know what’s for dinner.

Cut Back On Your Cell Phone

Many people buy new phones every two to three years and some new phones cost over $1,000. Consider buying a refurbished phone that’s a year or two old. You can often pay less than $250 for a refurbished smartphone that still does everything you need.

When you buy an inexpensive phone, you also don’t need insurance on it, meaning you can save $10-$15 per month additional. 

You can also reduce your phone’s plan. Some phone plans are as low as $15 per month if you don’t need a lot of data. Switching can save you loads of money each year.

Live in a More Affordable Area

If you or your spouse decides to leave their job, housing expenses may get tricky if you live in a less affordable area. If your income will be reduced for a longer term, it may make sense to move to a more affordable area. Depending on what the working spouse does for a living and how far their commute is, moving to an area for costs are lower could save you a lot of money both short term and long term.

Wrapping It Up

Living on one income opens the opportunity for you or your spouse to stay at home, whether as a parent, returning back to school, or to take care of something that needs to get done while the other one work.

In this article, we went over several ways to assist in the transition to having one spouse stay home while the other one works.

Do you and your spouse live on one income? What have you done to make both of you successful in doing so?