CAN YOU REALLY LIVE WELL ON ONE INCOME? WHAT DO YOU NEED TO MAKE IT WORK?
As a one income family (or if you’re considering becoming one), I know one of the things you think about is how to live well on one income in a two income world.
This is a legitimate concern and is one of the most frequently asked questions I receive from friends and family.
For lots of families, the idea of living on one income feels impossible, while many other families have found a way to make it work for them.
If you’re a one income family struggling to survive, know that you’re not alone. The good news is that you don’t have to keep struggling.
To live well on one income, there are some essential skills you need to learn to make it possible. So if you are ready to start thriving, lets talk about what these skills are.
(THIS POST PROBABLY CONTAINS AFFILIATE LINKS. OUR FULL DISCLOSURE POLICY CAN BE FOUND HERE.)
HOW TO LIVE WELL ON ONE INCOME: 7 ESSENTIAL SKILLS FOR ONE INCOME FAMILIES
1. LEARN HOW TO SET FINANCIAL GOALS
Whether you’re a one income family or not, you need to set financial goals if you want to become financially stable (or enjoy financial security).
Setting financial goals is even more important when you live on one income.
If you want to live well on one income, you have to learn to set money goals and prioritize your spending.
As a one income family, you can’t afford to spend money mindlessly or impulsively.
You’ve to become more intentional with your spending or you’ll keep struggling to make ends meet (unless of course you earn a boatload of money).
So if you are not used to setting financial goals, I recommend you start doing it.
Setting financial goals is really simple. All you need to do is figure out your priorities.
What are the most important things to you?
For me, it’s saving money, having a fully-funded emergency fund, paying for college for my kids and saving for retirement.
As long as I am able to do these things every month ( by that I mean make contributions to all these accounts) and pay my usual monthly expenses , then I am satisfied that I am living well.
While there’s no standard definition of what “Living well” means, most people would agree that living well starts with the ability to meet your financial obligations and not being under constant financial stress.
This is usually the starting point for a lot of single income households.
Then, once you’ve taken care of the basics, you can add some other things like traveling, buying new clothes or eating out occasionally. You know, all the things that would make life more enjoyable and comfortable for you.
So figure out what living well means to you and set some goals to help you achieve it.
Finally, you’ll need a working plan to help you accomplish your goals, so don’t forget about that!
2. GET GOOD AT BUDGETING SO CAN THRIVE ON ONE INCOME
For lots of people, budgeting is one of the most frightening words they’ve heard, but for the financially savvy, budgeting is one of the best things that could ever happen to them.
If you’re like most people, I imagine you’ve tried to budget at least once in your life, and maybe you stuck to it or gave up after a few failed attempts.
I tried and failed at budgeting a few times before I got the hang of it, and I can truly say using a budget has been a game changer for me and my family.
One of the reasons many people fail at budgeting is because they create an unrealistic budget and when they fail to achieve it, they conclude that budgets don’t work and drop it.
A budget can work if you create a realistic one and commit to following it. If you really want to thrive as a single income family, you need to know how to create and use a budget.
A budget is the most powerful tool for managing your family’s finances and achieving your financial goals.
So if you have been doing a poor job of managing your finances, consider creating a budget and using it correctly to plan and direct your finances.
3. LEARN HOW TO SAVE FOR EMERGENCIES
Unfortunately we live in uncertain times and our circumstances can change without any warning. That’s why we need to be prepared for emergencies.
First, let me say that some of the things we consider as financial emergencies are not really emergencies because they are foreseeable. For example, things like a car breaking down, a large bill becoming due etc.
Unfortunately, a lot of people don’t plan for these things that’s why they become emergencies when they happen.
Knowing how to plan and save for emergencies is an essential skill to have when you live on one income.
While we can’t plan for every single emergency that may happen, it’s still a good idea to anticipate them, and have a reasonable emergency fund to cover those unexpected events like a job loss, sickness, roof replacement etc.
A financial emergency can really take a toll on you and your family if you are not prepared financially.
So if you want to live well on one income, make sure you have a fully funded emergency fund that you can easily assess when you need it.
4. LEARN HOW TO MAKE GOOD FINANCIAL DECISIONS
As a one income family, knowing how to make good financial decisions is an essential skill to have, since one bad decision could lead to financial ruin.
Each day we are bombarded with lots of offers and opportunities, but a lot of them are scams or too good to be true (or not what you need right now).
Don’t sign up for anything you don’t understand or without weighing the long term consequences.
I have made quite a few financial commitments that seemed good at the time but they ended up making my financial situation worse.
Think carefully before you sign up for a new deal or package or before you refinance your mortgage or whatever.
Don’t think about only the immediate gains. Also consider the long-term effect on your finances.
It makes no sense to save a few bucks now if you’re going to end up spending more money in the long run.
If you’re not used to making good financial decisions, it’s something that you can learn.
Other practical things you can do to help you make good decisions include: waiting for a while before making decisions, getting a mentor or financial coach to help you out, if you’re married and your spouse is better at handling money, let them take the lead and make the most important financial decisions.
Some people are just better at personal finance than others and there’s no shame in letting them be in charge of the family’s finances (whether it’s the husband or wife).
So if you really want to enjoy living on one income, pay attention to the financial decisions you make and ensure you are making the best decisions for you and your family.
5. TO LIVE WELL ON ONE INCOME YOU MUST LEARN TO MINIMIZE EXPENSES AND LIABILITIES
What do you spend your money on? Where does the bulk of your money go?
It’s going to be really hard to live well on one income if you spend most of your income on liabilities.
So what are liabilities? The simple answer is debts.
If you spend a good chunk of your income servicing debts, you are going to struggle to survive on one income.
That’s why the smart thing to do is to minimize your expenses and liabilities. If you have lots of debts, you have to prioritize repaying them.
I know it’s very challenging to pay off debt when you live on a single income, but you have to get creative and come up with a plan to get rid of those debts. That’s the only way you are going to stop struggling to survive.
The same goes for your expenses. Get rid of expenses you don’t need and find ways to reduce the essential ones.
Many of you are paying for things you really don’t need or can’t afford right now, you need to let them go for now. You can always sign up for them later when your financial circumstances improve.
So take a long hard look at where your money is going and start eliminating all the money leaks.
Plug those holes and watch your financial life improve.
6. LEARN HOW TO EARN A GOOD INCOME
Can you live well on a very low income? Possibly, but I am going to get real here for a second.
It’s way easier to live well on a single income if that income is a good one and more than enough for your family.
What constitutes a good income is going to be different for everyone. For example, a good income for a family of four may be considered inadequate for a family of five.
Of course how good your income is also depends on how much liability you have and how high your expenses are. That’s why I talked about those things first.
Knowing how to earn a good income is a great way to live well on a single income.
There are lots of ways you can earn a good income. You can find ways to earn more money through your job (work at getting promoted, do some overtime etc), or you can add a side hustle or part-time job to make more money.
If you’re an entrepreneur or self-employed, there are lots of ways you can increase your income including: taking on more clients, selling more products, increasing your prices etc.
However, there are times when we’ve cut all that we can cut and we are still struggling to make ends meet.
When that happens, the only way out is to increase your income. So if you’re in that situation, that’s what you need to focus on.
Brainstorm some ideas for increasing your income and where possible, the stay at home parent can consider starting a side hustle or finding a work at home job to supplement the familiy’s income.
7. LEARN HOW TO MAXIMIZE YOUR INCOME
One of the best personal finance advice I have heard is “It’s not how much you make, but how much you keep.”
It doesn’t matter how much money you earn every month if you have nothing to show for it at the end of the day.
Knowing how to maximize your income is one of the best ways to keep more of your earnings. And the easiest way to maximize your income is by investing a part of it in income-generating assets.
Some examples of income generating assets include:
- Certificates of deposits
- Rental properties
- Stocks (especially dividend paying stocks)
- Some savings account
- Starting a business or investing in an existing business
There are many more income-generating assets you can invest in, but these ones are pretty popular.
If you want to thrive on a single income, it’s a good idea to learn how to stretch your dollars. Make your income work for you so you can earn more income.
But a note of caution.
Before you invest in anything, take the time to learn everything you can about that investment and only work with reputable sources.
There are a lot of people who live off the returns from their investments. These people have mastered the art of investing and maximizing their income over the years, and they are enjoying the rewards.
Don’t forget to protect your investments through insurance and diversification so that you can weather any storm without losing your hard-earned money.
Another easy way to maximize your income is by getting rid of debts and other liabilities, so you can have more money to save and spend on things that are truly important to you.
That’s how you live well on one income
IT’S POSSIBLE TO LIVE WELL ON ONE INCOME
You just have to know how to do it.
Yes, it’s challenging and requires some adjustment and a few sacrifices here and there, but if you really want to enjoy life as a one income family, then you gotta do what you have to.
Hopefully, the tips in this post will help you to achieve your financial goals so you can thrive on one income.
WHAT ARE YOUR BEST TIPS FOR LIVING WELL ON ONE INCOME?
Related living on one income articles: