Over the past ten months, my husband and I have made big changes to our spending habits. I know we’re not alone. The changing economy has inspired many people to spend less and simultaneously ratchet up savings.
Initially we changed our spending in order to save enough to cover a small down payment on a home. Because we have a decent household income, we were able to save up quite a chunk in five months by reducing our spending. This gave us enough to put 3.5% down on a beautiful condo.
Our goal now is to work towards living on one income.
We want to learn to live on one income and we’ve been setting up our life accordingly for two main reasons. First, it makes sense for us in terms of having financial security. If one of us lost our job, it would not be a terrible tragedy because our life is arranged to accommodate such a change. We would not lose our home or default on debt.
Second, we want to start a family and would like to have the option of going down to one income for a period of time. We’re not necessarily certain one of us will stay home, but we’d like to have a choice in the matter. We don’t want our options to be severely limited because we are overly dependent on two full-time incomes.
Half of successfully moving towards one income is reducing expenses, or eliminating them altogether.
Steps we’ve taken to reduce expenses and move towards a lifestyle sustainable by one income.
- I established a monthly budget (I wrote about this process here) and we’ve been working hard to follow it. This means I tracked our expenses for several months and we evaluated where we could (and couldn’t) make adjustments. For example, we were spending way too much eating out. And that was on top of a grocery bill laden with fancy, organic foods and convenience items. Clearly we cut that budget item down to less than half.
- After establishing our budget, I looked at our total income and discovered that (even after our retirement contributions) we bring in a substantial amount more than we “need.” We’re now putting this “extra” income towards credit card debt and savings.
- Once the credit card is paid off, 100% of the extra will go into savings to build up a nice nest egg.
- Any increase in income we get from pay increases or promotion also goes directly to debt reduction or savings.
- We’re cooking at home more, packing lunches, and making coffee rather than buying lattes every day.
- We were approved for an astronomical mortgage. We bought a place for half of what we were told we could “afford.” This keeps our monthly housing payment (including PMI and taxes) to less than 25% of our net monthly income. (I wrote about our condo purchase here.)
- We own our small, economical car that we bought new six years ago. Yes, we’d love a new ride but instead we’re keeping up with maintenance and enjoying that our money is going towards other goals.
- Speaking of cars, we only have one. My husband rides his bike or, rarely, takes public transportation to work every day.
- We started camping. This is turning out to be a very relaxing, enjoyable, and low-cost getaway option for us.
- We have friends over and go to their homes more than we go out and meet people. It’s more fun, costs way less, and helps us get to know people better too.
- We look for items used from second hand stores and Craigslist before resorting to new. For example, I bought a gorgeous mid-century sideboard for our dining room for $150 (talked down from $185) instead of the $700 new one I had my eye on.
- I’m using the library, rather than the bookstore, for books. This has the added benefit of reducing clutter in our home because I don’t have to figure out where to keep piles of new books every couple months.
- I’m simply not buying certain things. I would love to wallpaper our dining room, buy brand new towels for the bathroom, and replace all the knobs on our kitchen cabinets but I’m somehow resisting the urge.
Notice this post title indicates we’re moving towards living on one income. We’re not all the way there yet. And it will be some time before we are. The idea is that we are drastically reducing our dependence on a second income over time. Even if we were to subtract the “extra” income we’re putting towards savings and debt, we still rely on roughly 75% of our current take-home pay. The goal is to get that down to 50%.
Obviously the other half of this equation is looking for ways to increase our take-home pay. I’ll blog about this step soon.
Have you successfully moved from a two-income to a one-income household? I’d love some advice on how you made it work.