Thursday, September 07, 2006

How to Survive On One Income

A few days ago published a nice three-page article that piqued my interest:

Bankrate: "How to Survive As a One-Income Family"

It's a good article, and Teri Cettina is a good writer. But I contend that it doesn't take three pages to lay out this particular how-to. And I'd also contend that they left off one big chunk of the story.

Now, we're currently a one-income family, and have been since mid-2002. So far it's been a pretty manageable ride. So what I say here comes from personal experience. I've watched as others have tried to get by on one income (in our two-income world, as that's surely what it is) and failed. If someone were to ask me, "How'd you do it?" my responses would run along these lines:

Live Someplace Cheap

This, in my opinion, is what the Bankrate article left off. And it's too important a factor to ignore. If you live in an area where the cost of living is high, and your income isn't, then you're going to have a tough time making ends meet on a single paycheck. It's that simple. We live in Oklahoma, where the dirt is red, consumer prices are pretty cheap, and you can still find decent 3-bedroom homes for less than $90k. And you won't have train tracks carving up your backyard, either.

Don't Do Debt

This should be a no-brainer. If you're looking to scale down to a life that runs on one income, and you're bringing a truckload of debt into the picture, then you have your work cut out for you. I found it interesting that financial planner John Vyge threw out some specific numbers in the Bankrate article:

A good rule of thumb is that you're not ready to move to one income if your total debts — that means your mortgage, including taxes and insurance, car payments, and credit card payments — are going to take up more than 36 percent of the breadwinner's gross annual income.

Personally, I think it's stupid to base any sort of spending guidelines on gross income. I know a lot of people, and I don't know a single soul who gets to spend his or her gross income. Also, I think Mr. Vyge meant to say "gross monthly income," not "gross annual income," as most debt payments occur on a monthly basis.

The gist of this is: If you want to get by on one income, you better not have much in the way of monthly payments.

Plan Your Spending

In other words, you will have to do everything you can to ensure that what comes in, money-wise, is more than what goes out. This means you'll likely have to budget — to plan your spending. I'm fairly twisted in that I actually enjoy this endeavor. I've made it into something of a financial spreadsheet-based game of sorts.

Be Prepared to Say "No"

Less income means less choices. Or, if you're so inclined, more debt. Your call.

And that's about it. Surviving on one income is a whole lot about what you've done in the past — meaning that if you've kept your lifestyle and spending and debt under control going into your one-income period, or can clear it up really quick, you might well be able to flip the societal norm (two-income living) on its head, and do things your own way.

I had doubts early on, but now, after four years of doing it, I know:

If you can manage your money (and your lifestyle) effectively, then you can still survive on one income.


— Posted by Michael @ 11:17 PM


Michael, excellent points! We also live on one income. We just decided one day 7 years ago to go for it and make it happen and we did. My advice for others considering going to one income? Try living on slightly less than the single income you are planning to have for 3-6 months. Monitor the spending very closely, and sock all the other income away and DON'T TOUCH IT. It can be your emergency fund or you can pay down your debts. If you can't pull off the "slightly less" part, you will never be able to get ahead, and your life will resemble one crisis after another each time the car breaks down or the house needs a repair.



That's a very good idea. And one that would tell someone a whole lot about what they're getting into!


Good idea.But most of my income is eaten by the tax people say more than 30%,and you have to manage.The business men are lucky ,they show less profit than what they actually make,and pay less taxes.Emplyee means a good tax resource which you can not avoid as the tax is deducted at source.At times I wonder why they give this much salary and again deduct to pay the exchequer.


May be I have to learn money management.Do middle class people really have a surplus mergency fund?


Great post! My wife and I have been on a single income and where you live makes a Huge impact. We now have 2 children and I set up a portion of our income to go into a earmarked account for her as if we were paying daycare. This money acts as her investment account and is counted with our retirement. The goal is to show how we as a family value her contribution even if I bring home a more tangible form of compensation.


We're also a one-income family and actively managing your lifestyle and money are certainly the key. Very well put!



Looks like SPAM; tastes like SPAM . . . it must BE Spam!


I think it's important to add one more point. Make sure that the one income you are living on is a nice income.

** Comments Closed on this Post **

Thoughts on my personal finances, goals, experiences, motivations, and accomplishments (or lack thereof).

My financial life began turning around when I took responsibility for it.
— Dave Ramsey


Start (2005-12): ~$21,900
Currently: $0
[About Our Debt Paydown]


Savings Goal: $15,000
Currently: ~$15,115
[About Our Liquid Savings Goal]