Can your family live frugally on one income? While most American households are dual income, you might be interested in living off one income in order to save the other or to have someone leave work full time.
Having two people continue to work but aiming to save one person’s income and living solely off the other’s can mean a huge boost to your savings and investments. Many people who are interested in financial independence try to make this situation work for at least a period of time.
If you make $85,000 a year and your partner makes $60,000, being able to live off $85,000 as a duo means you can add $60,000 to your bank accounts in ONE year. That can make a huge difference on your way to financial independence.
Similarly, oftentimes parents opt to have one parent stay home for a few years after the birth of a child. Going down to one income as a family of three or more takes some preparation, but can save parents money on childcare and allow a parent who wants to stay home to do so.
Living on one income has become more challenging as things get more expensive, but if it’s something you want to do, you should go for it.
Whatever your reason for living frugally on one income, we have the plan for you!
1. Give Yourself Time
You don’t have to wake up tomorrow and start living off one income immediately.
Frugal living is best done with a strong plan! That means giving yourself and your family time to see what your needs and wants are before making any changes.
First, review your annual required expenses, like mortgage or rent, property taxes, food, healthcare, childcare, utilities, and transportation. What is your minimum spend to live your life? Using an app like Empower can make this review easy to do, since the robots track your spending and put the data right into your dashboard.
Now add in a few pleasures, like travel, concerts, or streaming services. Remember, frugal living is aligning your values with your spending. So only put the spending categories that really bring you joy. For example, if you’re not much of a fashion person, eliminate new clothes as a category!
Now that you have a number, work towards living off that number from both your incomes for three months, and saving the rest. Then slowly work your way down to living completely off one income over another few months.
2. Put Your Emergency Fund in a High Yield Savings Account
Speaking of those savings, where should we put them?
A HYSA, or high-yield savings account, is a savings account with a high interest rate. Big banks, like Chase or Bank of America, having savings accounts that offer rates between .01% and .10%. This means that any money you keep in these accounts earns basically nothing.
A HYSA offers interest rates like 4% or 5% and can make a HUGE difference for a one-income household. If you have a $20,000 emergency fund and keep it at a HYSA with a 5% interest rate, that’s a FREE $1,000 you make in just interest.
Here are our suggestions:
Wealthfront- this second FDIC-insured account offers “categories” so you can organize out your money into different pots, perfect for people saving for multiple goals.
3. Negotiate Everything
Negotiation and cutting costs are crucial to living frugally on one income. The thing we want to avoid the most is a huge unexpected expense coming up when we’re living off just one income.
The three big areas to focus on are your housing costs, food costs, and transportation costs.
For housing, consider downsizing to a smaller and cheaper place if your rent is 30% or more of your income.
If you own a home, consider renting out a room to create extra cash flow. You can even rent out your driveway to someone living in an RV! Or, consider building a tiny house on your property to rent out short or long-term.
Food costs are a constant in our lives because we gotta eat! Don’t beat yourself up about food costs too much, especially if you have allergies or health needs.
However, shop sale items first, and have a monthly “eat down your fridge” week where you eat the miscellaneous food items that have been left over. This cuts down on food waste, helps you build a sustainable lifestyle, and saves you money by helping you eat all the food you buy.
Finally, for transportation costs, consider becoming a one-car household and selling any other vehicles. If the working partner can bike or bus to work, that can also save huge amounts of money over time.
4. Take Advantage of Free Fun
Fun doesn’t have to cost you money! There are many free or very low-cost things you can do as a family that will bring joy to your life while helping you save money, especially if you live in a city or densely populated area.
Here are a few ideas to try:
-finding a local college and attending music student performances for free
-taking advantage of family night restaurant deals for meal discounts
-Attending free local festivals
-Picnics with friends in the park or your backyard
If you live in a more rural area, I encourage you to start a free get-together that interests you. You can host in a public place or in your own home. Reach out to people you know personally, or existing groups in the area to gain traction and get the word out.
Sometimes it can be hard to tell a friend that you’re saving money and can’t afford to go out, check out this guide to make those conversations a bit easier.
Definitely drop any other ideas you have in the comments!
5. Put Together a Family Emergency Plan
Do you know where the dog’s medicine is? How about the family life insurance plan? Can you log into your partner’s computer?
A family needs an emergency plan in case one partner is unavailable during an “oh shit” life moment. This could mean one partner is in the hospital, or out of the country when an emergency happens.
Each of you should have total access to information about each other without needing the other person there to give it.
The Family Emergency Binder is the perfect way to store this information! It has different files for important information ranging from memorial plans to investment accounts to pet care information. My partner and I have one so that if anything happens, the other will have all the information needed to make decisions and continue taking care of the household.
6. Pay Off High-Interest Debt
Debt will always be a budget killer. It means money leaving your bank account to go to someone else’s. And high-interest debt, like credit cards, is particularly brutal.
You don’t need to *only* focus on debt payoff, but you need a robust debt payoff plan for living frugally on one income.
You can use the debt avalanche method to organize and attack your debt. This plan says to list out your debt from highest interest to lowest. Then, make minimum payments on everything except the highest interest; put any extra money towards that ONE debt.
This targeted approach helps you pay off debt faster. It also means you pay less in interest overall because you eliminate your most expensive debt first.
Minimalism is also a great way to keep your costs low, read this post for more information.
Living on One Income Recap
Living frugally on one income is possible with careful planning and determination.
Use these steps to start your journey and make adjustments along the way. I suggest building financial community as well. People who want to hang out at free events with you, people you can talk to about money. Having financial community that understands what you’re working towards or your general financial goals will make your efforts much easier. No one does well when they feel isolated or misunderstood.
You can also add in more money-saving ideas as you get used to living frugally on one income. Your life and spending can and will change and that’s not a problem. You can adjust your money strategy too! Remember that money is flexible and that you are the one in charge.
Hopefully, these tips help your family save more money!
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