If this pandemic has forced your family to downsize to a single income, believe me there is hope for your family.
I know this to be true because we are a family of five living on my sole income. As tough as it should be, we’ve found several key lifestyle changes that help us thrive even during the widespread coronavirus.
Change Is Always Hard
We weren’t always a single income family. In fact, Mrs Simple FI loved her job. She loved it so much even though it brought her huge amounts of stress. But with the birth of our youngest child in 2014, we both decided that her being a full time SAHM was the better choice for our family.
Financially, it was very difficult for us. We were so used to living within our “means” that now we found ourselves overspending. This turning point changed our financial journey forever.
What we believed we “needed” to live our day to day lives – those expenses people buy to feel good but could actually do without – wasn’t really what we needed. So we did the next best thing.
We found our new means that we needed to live within. Easier said than done? Sure, but it took this life changing decision – to give up one of our incomes – for us to finally realize our needs and our wants.
For us, needs came in the form of self-spoiling, pampering, or the latest smart device. Somehow, when we had dual incomes, we were able to afford that lifestyle plus pay for necessities.
Once our family downsized to a single income, there was no financial room to keep up with the joneses. From that day forward, any money we earned could only go towards essential items.
Besides why did we try to keep up with them in the first place? They were probably broke anyway.
This shift in mindset took us away from the financial place we felt comfortable in. But little did we know, that was actually forcing us to find a new comfort zone.
By expanding our comfort zone away from the overspending life we had, this allowed us to break away from normalcy.
Our former routine was to spend money without much intention then hope there was some leftover to save. We didn’t pay much attention because the two incomes were helping mask the underlying behavior of our overspending habits.
That was our normal routine, our standard way of living.
How could we possibly live off one income now?
Just Do It
The honest truth – we had no other choice. There was no turning back or relying on that “other” paycheck to deposit in our bank account when things got tough. All we had was the single income from my job.
We forced ourselves to make living on one income work. Before making the big change, we had to consider some important factors such as location of work, cost of living, and monthly expenses.
With those factors in mind, we were unsure if we could make it work.
Despite the reasons why it would be difficult to live on one income, it wasn’t impossible. We just had to stretch ourselves and our way of thinking quite a bit to make it work for us.
Some things we did to lower our spending were:
- Eliminated cable TV but shared a streaming account with my in-laws
- Raised the deductible on our auto and homeowner’s insurance premiums
- Switched to a cheaper phone plan
- Cooked at home more vice dining out
- Assisted with kids’ sports which waived most of our team expenses
- Canceled memberships we didn’t have use for anymore
- Challenged each family member to lower their use of electricity
- Sold one of our vehicles
- Learned to cut our children’s hair
These were just some “out of the box” techniques we incorporated to spend less which allowed us to put our money towards more important areas.
Honestly, cutting back on comfortable spending was difficult before it became easier. But after that initial phase of difficulty it became habitual for us.
Once we made these financial practices a part of our daily lives, we were heading in the right direction.
Look At The Brighter Side Of Things
Also, having a stay at home parent with the kids gave us some financial advantages as well.
We no longer had to pay for child care, probably the highest expense for families. This eliminated around $900 from our monthly expenses.
Our taxable income decreased drastically dropping us into a lower tax bracket. This helped us pay much less in taxes.
With one parent not working, this meant less transportation costs for our household. While we didn’t plan to do it, we ended up selling one of our vehicles. There wasn’t a justifiable need for it plus we did everything as a family anyway.
Downsizing to one vehicle saved us a bunch on gas costs plus we weren’t paying insurance on an idle vehicle anymore which was nice.
Slowly this became our new norm – being content with less. In our case, less truly meant more.
Less spending meant less expenses which equated to more usable income.
Don’t get me wrong, cutting back on expenses didn’t automatically mean we were stress free. We still had our share of down days. But spending less gave us the financial wiggle room to build our “gap”.
Coined from the group ChooseFI, the term gap meant the space between your expenses and your income. To grow the gap, you either want to lower expenses or increase income.
Obviously for our situation, we decreased our gap by dropping to a single income family. Then we countered that by lowering expenses thus giving us a gap again.
Only this time, we had cut way more expenses than we ever thought possible so our gap was actually much larger than when we had dual incomes.
Find A Way
In order for us to really hone in on our finances, I took it upon myself to analyze every single transaction. As unexciting as it may sound, this gave me clarity on what was happening with each dollar we earned.
To sit back and just “let things happen” would have meant financial suicide. This mindset couldn’t carry on anymore – not with one income – if we wanted financial freedom.
Sitting down and reviewing our previous 12 months of transactions enabled me to create a realistic budget for us to follow. We had a budget prior to this time but there was too much slack. It wasn’t accurate with one income.
Setting a realistic budget and implementing it came down to constantly communicating with Mrs Simple FI. Week after week we would talk about our financial plans, scrutinize every transaction, and have an interactive dialogue about what our next moves were.
This consistent back and forth communication about our finances gave us both clear and simple understanding. What was each dollar doing and how could we improve.
At this point, it became evident that I needed a way of keeping track of our progress. Just because it felt like we were doing well, there needed to be a way for me to capture that.
Then it donned on me. Something I used to do, probably picked it up from reading a financial blog, but forgot about. That was tracking our net worth.
To me, keeping track of our net worth was comparable to a car’s GPS system. It let us know:
- Where we were (previous destination)
- Where we were at (current destination)
- Where we were heading (desired destination)
That’s when I realized that this needed to be done. It couldn’t get any simpler than that.
Plus I thoroughly enjoyed keeping track of our net worth each and every month. You can read about them here if you’d like.
Expect The Unexpected
Besides spending less and tracking every dollar, having a safety net played a key role with our finances.
It just so happened that after we became a single income family, there were a few unplanned expenses that could have blown our budget out of the water.
If not for our emergency fund, we would have been knee deep in debt. Not the most ideal situation when we just dropped the supplemental income we once had.
For anyone looking to make single income living easier on them need to have a cash reserves set aside for the “what ifs”. They will happen at some point in time. It isn’t a matter of “if” but “when”.
Preparing ourselves for the unexpected helped us keep our sanity during the hard times. From our family vehicle’s AC kicking out to the washer breaking down, emotions would have been higher had it not been for the money we set aside prior to each event.
Even till this day, we continue to add money into our emergency fund with no cap in mind. If it ever exceeds 12 months worth of expenses then we might invest that money towards something else.
Rewards Are Required To Be Successful
Something else to consider – that we didn’t really think about at first – was the practice of delaying gratification.
Here we were, slowly building momentum, spending less and saving more. But we weren’t exactly living the life we wanted to live.
With a family, especially with young children, I felt that we were depriving them of the joys that being a child brings. They weren’t brought into this world to live some miser life.
Their life was chosen by default because of me.
I knew that because we had a better grasp of where our money was going that we could splurge on inexpensive things in life. This came with two caveats though.
We, as a family, needed to 1) challenge ourselves to meet a certain dollar amount in savings first and 2) have an agreeable reward for us once we achieved it.
This taught us a few things. Pushing each other to really think about our current spending habits kept us accountable for our actions. The little ones suddenly weren’t asking for toys or candy as often as before. Key word is “often”.
And the reward gave us all something to shoot for. Like having a finish ribbon at the end of a race, we knew what to strive for.
The kids instantly bought into the idea. For us, our weakness was – and still is – eating sushi. If we don’t have sushi for more than two weeks, we aren’t a happy family to be around.
All joking aside, the joy we felt together every time after achieving our goals made the sushi taste that much better. The taste of victory intensifies when it’s earned.
Best Time To Plant A Seed Was Four Years Ago…
Fast forward to today, would I change anything we started back in 2016 when we decided to become a single income family?
Nope. Every single action we took helped prepare us for a time like now during this pandemic. No one could foresee this happening but it did. And we knew that we prepared for it because we had already adopted the single income lifestyle before.
It helped us tremendously that we followed a budget, limited our spending, and stayed committed to the process.
Were we perfect in following the process flawlessly?
Not in the slightest. We fell off track like many families do. We gave into the financial urges just like most people do. The difference maker was we knew what needed to be done to get back to normal.
We figured that part out already. The process was built way before this pandemic came into fruition. We were ready for it.
This raised the question of could we have, as a dual income family, lost an income during the pandemic, and thrive?
I’d say with 100% confidence – yes! It wouldn’t be easy but it would be doable.
Similar to this moment we are in right now, I’d consider us deciding to become a one income family could be defined as a life changing event too. It wasn’t forced upon us but it still changed our lives.
Another major change we made today compared to back then would be using more than one bank account to move all our money around. It isn’t the most simplified way to track money but it helps us gain macro level clarity with our finances.
Think of it as setting up mini cash reserves for the occasional expenses. The ones that aren’t fixed or don’t need to be paid every single month. Those always caught us by surprise.
The nice thing about having multiple accounts is if we don’t spend the money from those accounts they start building up into some nice chunk of change.
For us – pandemic or not – we were prepared for it. We adopted that single income life years ago. Guess all that struggling in the beginning paid off in the end.
But the best part about it is – this isn’t the end. We will be living off one income long after this pandemic subsides.
If and when we become a dual income family again, that extra cash will just be icing on the cake for us. We’ve got big plans for that money but we’re not in any rush. It’s nice having one of us parents raise our children vice sending them to daycare.
Conclusion
I’ll leave you with these simple rules to follow if you want to thrive on one income. Commit yourselves 100% to the process. It wasn’t meant to be easy, not at first anyways, but it will get easier once you build the habits.
Practice analyzing every transaction and track your progress. I used our monthly net worth as our GPS, it kept us aligned with our financial goals. Lastly, if you are a two-income family, pretend one of those incomes don’t exist and send it straight to your savings. It’ll be like living on one income without actually doing it. Hope it makes sense to you because it does to me hah!
What would be the toughest part for your family living a single income? Do you have a backup plan if you needed to downsize to one income? What would you give up so you can thrive as a single income family?