Life changes. At one point in time or another, you may find yourself struggling to live on one income. This can be as a result of various reasons such as an increase of costs, losing a job or health challenges among others.
So, how do you live on one income and still remain happy and comfortable? I’ve listed a few ways below.
Pay off debt and reduce credit
Pay off debts as soon as possible. Debts can be demoralizing both financially and emotionally.It obviously takes a huge toll on your debt to income ratio which reflects on your credit report. It feels bad to have a paycheck stating that your income was a certain amount and part of it has been cut out to pay that debt.
If you usually pay on credit, then you are living on your future income. In simple terms, you are living on money that you don’t have. You should reduce or eliminate utilizing credit to balance your budget.
Pay for goods and services using cash, check or debit cards. Anything but credit. Be creative in various circumstances. For example, if your dishwasher breaks, you can wash your dishes by hand instead of buying another one on credit. You will save on the interest which, when accumulated ends up being a big figure.
If you must use a credit card, then select only one with the lowest interest rate. This should only be a last resort, especially when you have financial challenges. Repay your monthly balances on time and ensure that you don’t have an outstanding balance to be repaid in 90+ days.
Set a budget or revise your existing one
If you don’t have a monthly budget, you should draft it.
If you already have one, categorize your monthly needs based on their importance. Create a list of all your expenses and mark or circle anything that you can survive without.
By differentiating the needs (essential) from wants (discretionary), you will be able to cut back costs and use the income you aren’t spending to settle down your debts or save and build an emergency fund. Also, by differentiating these costs, you can also allocate funds to pay off bad debt sooner.
As long as you know the exact amount of money you spend on a monthly basis, it will be easier to trim your budget to fit the current income situation. You should always know what each and every dollar covers in your budget. The planning part can be easy, but it can be crazy trying to implement it, especially in the first month. However, do your very best to stick your budget.
Earn extra income
After cutting expenses from your budget, if you still can’t pay some of your bills, look for other ways to earn some extra cash. With advancements in the level of technology, there are many things that you can do and even make money from the comfort of your home. These include web design, freelance writing, internet marketing, starting a blog and more.
You can also consider upgrading your skill set so that you can earn promotions at work. Think of other business plans, draft them down and conduct thorough market research studies until you find one that suits your skill set and financial goals
Develop a culture of saving for big purchases
Instead of approaching a financial institution in which you have to borrow money for a big purchase, you should just make interest-free deposits into your savings account. Save until you accumulate the full amount and then make a debt free purchase. An added advantage is that you will be forced to consider your purchase over an extended period before you can make your final purchase decision. This extra time will help you make an informed, sober decision.
Try to only take loans for income generating purposes and after doing thorough market research. This way, the loan will be repaid by the business venture and you will have added an extra source of income.
Live Within Your Means
Stop competing with other families, especially the ones that appear to be doing better than you. Don’t try to keep up with the Joneses. Competing with someone who earns more and has more purchasing power than you will only leave you broke and frustrated.
Be honest with yourself on what you can afford. Don’t get a brand new car just because the other family has one. You should learn to be content with the less you have. It’s obvious that you will own a small home with less fancy cars, but be assured that you won’t be missing much. There is more joy found in pursuing less than can be found in owning more.
Prepare Yourself for Emergencies
Emergency funds help in reducing the anxiety of living on one income. It’s also great for protecting you from the unforeseen future expenses. Unexpected things such as medical conditions, accidents, robberies, damage of property, job loss and more do happen. Your savings can keep you from ending up with considerable bad debts; which are to be avoided as much as possible. Once you withdraw and use your emergency savings to take care of that emergency, ensure that you replenish it as quickly as you can.
Your emergency fund should be approximately 3 to 6 times your monthly salary. Start by saving a few dollars per month. With time, your emergency savings will accumulate, and you will feel more secure. Some also prefer to save a certain amount of cash every month. You can also try and ease the burden of saving for that emergency fund by having it automatically from your paycheck so you get used to living on less.
Use one car
Most working couples have two cars that they use to go to different workplaces. If one person is at home, you no longer need to have two cars. Sell it and reduce your costs on car payments, gas, car maintenance, car insurance, car washes, etc.
You can adjust the times you do shopping and other heavy tasks that would need the car. Make sure these are done when the car is available, such as in the evenings or weekends.
Move to a less-expensive house/apartment
Cut extra costs by moving to a less expensive apartment/house. You can even decide to move closer to the income earner’s workplace. This will shorten his or her drive resulting in the decrease of commuting stress, and will also lower gas costs.
Changing your lifestyle is not easy. It comes with its own share of challenges. These involve making sure you pay your debt, cut on credit, trim your budget, increase savings and reduce expenses. These lifestyle changes will help you to steadily grow financially and reduce stress, despite the fact that you are living on one income.
Have you ever had to live on one income? For how long? Did you achieve your desired end result?