Living on one income

Are you considering living on one income because you are starting a family or having another child?   Maybe you are considering moving to one income so you can save the other and get ahead financially.  Or it could be that you are concerned about job security or ill health and may be forced to go to one income.  Regardless of the reason there are a number of steps that will help you work out how viable living on one income will be.  

1.    Calculate your housing costs
Rent or mortgage payments are one of a households biggest expenses.  Can you afford these costs on one income?  If not, are you prepared to consider moving to somewhere less expensive?

2.    Strengthen your financial foundations
Before making the decision to live on a reduced income, it's crucial that you have a good rainy day fund and very little (if any) credit card or consumer debt.

3.    Experiment
While both of you are still earning your regular salaries try living on one income for a month. Pretend the other salary doesn't exist by directing those funds into a savings account.

4.    Track expenses
While you're experimenting with living on one income, track your spending so it's clear where cuts could be made if needed.

5.    Repeat the experiment
Live for another month on one income while earning two, but this time try changing your habits based on what you learned from tracking spending during the previous month. Spending smarter is good for your finances no matter what, and will help you both feel more in control of your money at a time when you're making big changes.

6.    Put your expenses under the spotlight
If living on one income still seems out of the realm of possibility after changing your spending habits, take a deeper look at your expenses to see where else you might be able to cut back.

7.    Communicate with your partner
Make sure you are on the same page as your partner and you both are committed to living on one income.  Discuss and agree the sacrifices and changes you are prepared to make.

8.    Make a plan
Write down the changes you are going to make so you are both clear on what needs to be done.  

Lisa Dudson is a bestselling author and Registered Financial Advisor with over 15 years industry experience. Lisa offers financial advice through www.acumen.co.nz and co-owns the New Zealand's leading property investment agency www.ifindproperty.co.nz