Here's another helpful post from our friends at Savvy Sugar. Check it out:
There are too many families who were taken by surprise when one breadwinner suddenly lost his or her job, but some couples might choose to give up an income for one reason or another. Maybe one person was offered a job in another city, leaving the other one without employment, the couple wants one parent to stay home with the kids, one half of the duo is miserable at work and wants out ASAP, etc.
Before you make the choice to live on one income, you need to find out if it's a viable option by following these steps.
1. Re-Calculate Your Housing Costs
It's likely that your rent or mortgage accounts for the largest chunk of your expenses. Calculate what percentage of the household income would go toward these costs. If it's a number that doesn't make financial sense, ask yourselves if you're willing to move somewhere less expensive.
2. Get Your Financial House in Order
Before making the decision to live on a reduced income, it's crucial that you have a solid emergency fund and very little (if any) credit card debt. You'll have less wiggle room after making the drastic change, and the situation won't be so smooth if you go into it with shaky finances.
While both of you are still earning your regular salaries, put your wishes to the test and live 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. Both of you can track your own expenses in a shared spreadsheet, or you can hook your accounts up to a money management program like LearnVest's My Money Center that will categorize your expenses for you.
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. Look Harder at Your Expenses
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. Could you live with one car instead of two, or find a cheaper one? Would you be willing to reduce your cable package? Scale back your cell phone plan?
7. Communicate With Your Partner
Because one person is going to rely on the other for financial support, it's necessary for the lines of communication to be as open as ever. If you're the one turning away from your income, ask if your partner feels like there's too much pressure on him or her. Just because you might be able to get by on one income doesn't mean the other person won't feel additional stress. The two of you need to discuss whether any sacrifices are worth it.
8. Come Up With a Plan
Your previous ways of managing money might have to be scrapped when you're living on one income. Perhaps you used to have one shared account and a personal account for each of you. That system might continue to make sense, but it might not. The most important thing is that you're both on the same page, so agree on how to manage your money and stick to the plan.
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