Ten Lessons from a One-Income Family

My wife and I have been married for nearly 19 years. During most of our years together, we have been a two-income household. Both of us always worked, and there were years when she made more money than I did. A couple of years ago, the unforeseen happened: she became very ill with diabetes and was unable to work. In fact, her doctor gave her authorization to get a handicapped parking sticker because nerve damage to her feet prevents her from walking too much or standing too long. My wife has applied for disability through Social Security, and is till fighting for it. She is only 40 years old.

Very quickly, we had to adjust to becoming a one-income household. It meant that we had to watch our spending and stretch my income as far as we possibly could. We had never planned on living on one income, and we quickly burned through our emergency fund, which I am once again in the process of rebuilding.

Is it possible for a family of four to live on one income? Sure it is. Is it easy? Not exactly. We learned some hard lessons making the transition from a two income household to having only one breadwinner in the family. Here are some lessons we picked up along the way.

1. Expect the unexpected. If you are married, don't expect that you and your spouse will both be able to work until you hit retirement age. Things happen: people get sick, they become disabled, they get injured on the job, etc. Don't automatically assume "this won't happen to me". Ask yourself "what if this happens to me?". What will you do then? Make a plan in case the worst does happen.

2. Don't skimp on insurance. This includes health, life and long-term disability. If you and your spouse both work and depend on both incomes to cover your household expenses, you should both have all three of these insurance policies. This is one area where you can't try to get by on the cheap. If one of you is suddenly unable to work due to illness, death or disability, you will need this insurance.

3. Two words: emergency fund. Not all illnesses and disabilities are permanent. Ideally, your emergency fund will have three to six months worth of expenses (not three to six months worth of income. There is a difference). Determine what that number is and start socking away some money. On personal finance blogs, the term "emergency fund" has almost become a cliche'. There is a reason for that. It's that important.

4. You can't live like you still have two incomes. Why? Because you don't have two incomes. Now you only have one. That means less money to spend on things you might have taken for granted. Downsizing to one income is not just a fiscal change, it's a lifestyle change.

5. Don't stop saving for retirement. No matter what your current situation is like, you will still need money for retirement someday. You might have less to save for retirement, but save something.

6. Remember, you will save money, too. With only one person going to work each day, you might be able to get rid of that second car. Also, only one person needs to pack lunch each day, pay for a business wardrobe or work uniforms and other work-related expenses. If you had been paying for daycare for the kids, you can get rid of that bill, too. Shift money you were spending on these expenses to other areas.

7. Use the Savvy Frugality spending plan for unexpected windfalls. If you come into some unexpected money, don't automatically think of this as "mad money". Pay debts first, then your emergency or savings fund, then household expenses. For example, if you have no long-term debt, then throw that money into savings. If your emergency fund if fully funded, then take care of those household expenses. Whenever I get unexpected windfalls, I always use 10 percent for "fun money". By doing that, I don't feel like I am depriving myself, and I prevent myself from blowing the other 90 percent.

8. Diversify your income. Never depend on one job or one income source for your living expenses. I am like Kramer from the TV show "Seinfeld". I am always looking for another way to make a buck, because my family could always use an extra buck. This could mean being a regular seller on eBay, working a part-time job, making and selling crafts, etc. I have a 9 to 5 job, but I also do freelance writing for web sites on the side. I volunteer for extra work at my job, especially if there is a bonus involved. This extra money will never replace my income from my regular job, but it sure makes life more comfortable.

9. Remember this important advice from The Tightwad Gazette: Buy it cheaper, make it last longer, use it less. This can apply to many things in your household, or to your car. The less often you have to replace something in your home, the less money you will spend.

10. Don't live on credit. Don't try to get by temporarily on credit cards or payday loans. You will only dig yourself into a deeper hole. These are no substitute to emergency funds or reducing your spending. You may have to downgrade to a less expensive car, a cheaper home and tap water instead of bottled water (which is a good idea anyway). Remember, these things don't define you as a person, and who cares what other people think? They aren't paying your bills. Also, some people CHOOSE to be a one-income family, either due to a new child, one spouse returning to school, etc. There is nothing wrong with that, but these moves do require some pre-planning.