Whether your spouse got laid off, a baby is on the way or you just want to spend more time with the kids, there are times in life that call for living off only one salary instead of two. Although it may seem like a daunting task to make ends meet, living off one paycheck is definitely doable. Try these simple tips and you’ll find adjusting to one income doesn’t have to break the bank.
Make a plan
Sit down with your spouse and create a budget. Make a list of everything that will change, including your new income, daily expenses and savings goals, but also areas where you will possibly save money, like eliminating daycare costs or driving less. Make sure you both have the same financial priorities, like keeping debt at bay or saving for college. Creating an understanding of your current financial situation, and where it is going, will aid you in spending your new income wisely.
Reduce your expenses
If, after comparing your new income to your monthly expenses, your budget turns out tight, you’ll have to learn to cut back. From eliminating luxury services such as cable and house cleaning to simply eating out less, there are many ways you can save money and still live comfortably.
Fine-tune savings contributions
Since you will likely lose the option of contributing to two 401(k)s when you or your spouse leaves work, consider making up for it by using an IRA, or maxing out your contributions to the income-earning spouse’s 401(k). If need be, temporarily lowering your retirement savings is not the end of the world. Do what you can to save, while keeping debt at a minimum.
Adjust your taxes
With one spouse not working, you can change your tax withholdings and get more out of your one paycheck. Consult your accountant or financial advisor about how much to set your withholding for.
Consider other sources of income
If time permits, the non-working spouse should consider working part-time, or even seeking out a temporary position. Any extra income, no matter how small, will help make the adjustment to a lower income go more smoothly.