Effective Ways Families Can Survive On One Income For A Debt Free Future

By Sharon Fonge, MBA Finance & Accounting

A New York based Family and Work Institute report shows that 79% of households have both partners in the work force. In today’s economy, many households are cutting back from living on dual incomes to living on a single income… either by choice or because of economic hardships like unemployment. However, the success of transitioning from a double income to a single one will depend on thorough planning and the willingness to make difficult choices. In this article, I will share some effective ways your family could live on one income with or without a second income.

The most important step towards living on one income is motivation. What is the motivation behind your desire to live on one income? Are you trying to pay off outstanding debt (student loan, car note, mortgage or credit card debt)? Are you trying to start up your own business debt free? Are your planning on saving toward college for your kids? Are you thinking of retirement? Whatever your motivation is, make a commitment; regardless of how hard it may seem, remember you are sacrificing for future gains. If both spouses are committed and motivated, everyone in the family will soon realize the value of the sacrifice and participate towards the long lasting benefits.

Once you are motivated and have committed, then you can start the preparation phase. Preparation is very important and need I say vital for the successful outcome of this initiative? You will have to plan in advance on how to save, what to pay off first, and how to spend the second income (if you have one). I would say test living on one income for about six months prior to diving in, so as to understand how to scale back on spending. Create a spending plan based on one income which includes necessary monthly expenses such as bills. Do not be intimidated … budgeting only helps you plan wisely. Once you are prepared and are sure you can handle the experience, then execute.

If you intend to use the second salary to pay off debt and build up savings, make a list of your debts, then begin paying them off systematically. You may choose to pay off the debt with the highest interest rates or the biggest debt, find what works best for your household.

If you find one income cannot cover the expenses, you may want to consider changing your lifestyle. Start by making small changes for example, eat out less, lower your cable bill by reducing your cable channels or switching to a cheaper plan. Do the same with your cell phone plan; many cell phone providers offer bundles, try those. Refinance your mortgage or downsize if you have to, remember you’re working towards a debt free future. Shop for food and household items in bulk, and make more home cooked meals – it’s fun and helps your family bond better.

Another thing I found is that many employers provide incentives for employees using public transportation. Research this, it may be a good fit for you. I personally am taking advantage of this option and enjoy my commuting time just relaxing while saving on gas as well as cutting down on the wear and tear of my vehicle. Only shop for what is needed and not for what you want. Take fewer vacations and buy inexpensive gifts (it helps if you shop for gifts in advance).

These are but a few ways to go about living on one income. I hope this helps you plan for 2013 as a debt free year for your household with or without the fiscal cliff.

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