They are out there. I get letters from people all the time telling me about how they’ve adjusted their spending so they can be a one-income family and save. If you and your mate have been spending every cent you make and then some, and haven’t been able to come up with the money to save maybe you’ll want to take a page from their book.
Step 1: Take a hard look at your money
Are you spending too much on housing? On transportation? On food? Do you even know how much you’re spending or does the money just roll in and out every month? If you want to live on one paycheque, you’re going to have to plan carefully for where that money will go. Flying by the seat of your pants won’t cut it. Do a spending analysis to see where your money has been going — in great gushes or in small dribbles — and get ready to cut back.
Step 2: Make a budget
Start by focusing on just your essential expenses: the things that will keep body and soul together. Do you really need two cars? How about your housing costs? If it takes both incomes to pay for your shelter, you may have to downsize. Once you’ve got the bare bones covered, decide where you’re going to put any extra money you may have into your budget to have the life you want. No, you won’t be able to order in or eat out like you used to; that’s pretty well a given. But what will you do for fun and joy? One income doesn’t mean a life of drudgery. It means a life of careful consideration and choice.
Step 3: Get rid of your debt
It’s virtually impossible to live on one income and pay off a whack of debt. So the first thing you’ll do with your second income is get that debt paid off lickety-split. Make a plan to have the debt gone by a specific deadline so you don’t drag it out forever. Yes, aside from a small amount going to long term savings and your emergency fund, focus on your debt and getting it gone.
Step 4: Speaking of an emergency fund…
If you only have one income to count on, you better have a big fat just-in-case fund … just in case.
Step 5: Live on a single paycheque
Having made the plan, now it’s time to execute. Tweak your budget without tapping the extra paycheque.
Step 6: Figure out what you’re going to do with your extra money
This is the very rewarding part. Now that you have cut back to living on one paycheque, you can use the other to achieve a bunch of things. If you have debt, you’re going to make that debt history. You can grow your emergency fund. You can boost contributions to retirement and educational savings. You can save for a downpayment on a home, build up the money you’ll need to see you through a maternity leave or three, or work towards starting your own business.
Having money in the bank gives you options. Learning to live on less, gives you the discipline you need to have a life now and achieve whatever goals you may have for the future.