Many couples are deciding more and more that one parent should stay home to care for their children. Transitioning from two incomes to one income can be challenging. If you and your spouse are thinking of becoming a single income family, please read on for the four P’s that may help with that decision. There may be other things that your family needs to think about, such as insurance and retirement. Make sure you and your spouse think about all other factors.
Practice living on a single income for six months to one year. You and your spouse should figure out which one of you would be staying home. That persons income should then be saved, instead of going to the monthly budget. If you can live without that income for a minimum of six months without touching it for any reason, you MAY be able to switch from a dual income home to a single income home. This does mean that you should decide based on this alone. Make sure to discuss other factors.
BONUS PERK: Since you’ll be saving that money for six months or longer, you should have a nice chunk of your emergency fund already fulfilled. Even if both household members continue to work, it’s good to have that. We’ll talk more about the emergency fund in another section.
Write a list of all expenses. Look at that list and figure out what is a need and what is a luxury item. Luxury items can be cut if you aren’t making ends meet during your practice run. By cutting out those luxury items, you can help offset the income that isn’t coming in. Here are some things to think about…Do you eat out a lot? Can you learn to cook, instead, so you don’t have to spend so much eating out? Do you have the most expensive cable package? Or even a moderately priced one that you don’t use to the fullest? Do you really need all of those channels that aren’t being watched? Can you get a cheaper phone plan or less expensive phone? Are you smart about your electricity and your gas bills? Do you really need it to be sooo cold during the summer and sooo warm during the winter? By answering questions like these, you start thinking about the things that you actually need, which will make it easier to cut things out.
I mentioned it earlier, but an emergency fund is a necessity. You need to protect your family from “uh oh” expenses that aren’t included in your monthly budget. Financial analysts recommend that approximately 3-9 months worth of expenses should be saved in your emergency fund. I am a worrier, so I always recommend the higher amount. You should know what your expenses total each month from when you prioritized them, so take that times six or nine, to be safe. Building an emergency fund can be a challenge, especially on one income, so I recommend getting that set up prior to becoming a single income family.
Perfect your monthly budget. Your budget will change from time to time, but I am a strong believer in setting one each month and sticking to it. Your budget will likely never be perfect, but you can perfect the process of working through it. It is very helpful (necessary in my opinion) to sit down with your spouse to figure out your budget together so all parties are on the same page.
If you’ve done all of these things and your family is ready to make the transition, know that it is challenging, nerve wracking, and stressful. These are normal feelings. It is scary to lose an entire income, so don’t expect it to be easy from the beginning and plan to be flexible with your spouse. There are bound to be some mistakes made along the way. You’ll have to work through them together.