If the past couple of years has you reevaluating your life, you’re not alone. Many families have decided to take the wrecking ball to the way they’ve been doing things and trading it for something better. Northwestern Mutual surveyed 1,000 Americans ages 26-57 and found that the majority of people’s priorities are shifting. According to the study, 21% want to pursue a new passion or have kids, 30% want to travel, 27% want to purchase their dream home, and more.1
Among those shifting priorities, many families are asking themselves how to go from two incomes to one. If that’s something you and your family are considering, you may also be pursuing the financial strategies to help you get there.
Here are eight things to consider to help you transition into a single income family:
1. Create a brand-new budget.
Your budget will become one of the best tools in your financial toolbox as you figure out how to go from two incomes to one. So, get out your favorite budgeting app or spreadsheet and start fresh. Add one spouse’s income and input all of your monthly expenses. If there’s still money left over after you’ve added in your monthly expenses, that’s great. But if you’re seeing red, it’s time to get creative with how you spend money, what you cut out, and how you can bring in some extra income.
2. Get your spending in check.
If you’re doing this for the first time, you might notice that the numbers just don’t “work” right away. If that’s true for you, that’s okay. It takes some time to work out the kinks. And those kinks are called your spending habits. Ask yourself where you can make some sacrifices. How can you change your spending habits to support your new one-income lifestyle?
3. Strive to get out of debt.
Debt may be keeping you chained to your past and keeps you from moving forward toward your financial goals. As you figure out how to become a single income family, getting rid of your debt will go a long way in helping you get there. Tools like the debt snowball and the debt avalanche are a great place to start.
4. Pad your emergency fund.
An emergency fund is a necessary part of any great financial plan. It’s essentially the financial umbrella you need for when “life happens.” The roof will inevitably need to be replaced at some point. The car will need new tires. And those leaky pipes might need to be replaced. That’s typically why we suggest you may need a fully funded emergency fund. As a general rule of thumb, consider shooting for three to six months of expenses.
5. Save big.
Now that you’ve got your emergency fund squared away, it’s time to think about those other life expenses like vacations, new cars, or even your child’s education. That’s where sinking funds come into play. Once you have your emergency fund in place, make sure you’re setting aside money every month for your family’s next big financial goal.
6. Consider bumping up your coverage.
Insurance plans may be the last thing on your mind, but that doesn’t mean they’re not important. When you become a single income family, you’ll still want to think about how to position your family if the working spouse becomes disabled or even unable to work. Talk with your financial advisor to see if supplemental coverage is necessary for your family.
7. Get on track for retirement.
Your retirement goals don’t have to stop when you’re living as a single income family. Take full advantage of the working spouse’s retirement benefits and consider creating a second retirement account for the non-working spouse. Just because you’re living off one income doesn’t mean you should press pause on your retirement dreams. Ask a SageSpring advisor how you can partner together toward your financial future.
8. Ask for help.
One of the best things you can do for your family and your financial future is to ask for help. Getting the right people on your financial team can make all the difference. SageSpring is here to help. Talk to an advisor today and we can help you as you prepare to live as a single income family.
Like we said earlier, becoming a single income family can be challenging . . . but it can be done! Using these eight tips will help get you started in the right direction. But one of the best things you can do for your financial future is finding the right financial advisor to help you as you navigate your new lifestyle. Reach out to your SageSpring advisor today.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of SageSpring Wealth Partners and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.