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26.03.2012 in Budgeting by Lena Gott 3

Can You Really Live on One Income?

Four years ago, I transitioned from a stressful desk job to being to a stay at home mom.

How our family manages live on one income is probably the thing I got asked most about when friends and family learned I wasn’t going back to work after my maternity leave ended, so I figure lots of people are interested in this very topic.

Therefore, as the blog grows, you might see several posts on making the transition from a dual income household without kids to a single income household with two (or more) kids.

Living Beyond Our Means: Could We Ever Live on One Income?

Making the initial jump from a comfortable two-earner household without kids to a single income household with a little one was not an easy.  We were used to spending our money willy nilly without any pressing responsibilities to consider.  Even though I have an accounting degree, I didn’t have the first clue when it came to personal finances when I was in my mid twenties.

If we had been smart, we would have never lived like we had two incomes in the first place.   Instead, we spent nearly everything we had left over after retirement contributions each month (thank goodness at least we saved for retirement along the way! LOL) on eating out, home improvements, and long weekend trips.  After working three years, we had only $500 in our bank savings account; it wasn’t a pretty picture.

The Push: Thinking About Starting a Family & Hoping to be a SAHM

We always knew we would start a family approximately 5 years after we got married.  But with two years to go until that time, we found ourselves with virtually no savings to speak of other than retirement accounts (and we don’t consider retirement money “touchable”).

Not only did we know we wanted to start a family in a couple of years, I knew I wanted to give staying at home a shot.  So every night for a couple weeks, I sat down with our checking account and Quicken entries, trying to figure out how my husband had categorized our expenses (they were all over the place…auto fuel in with groceries, etc…but that’s another story) so I could get a feel for our actual expenses.

I eventually piecemealed together a snapshot of our current financial situation; needless to say, we spent about what we made each month, sometimes a little more.  I really thought, “How in the world are we ever going to whittle this budget down so expenses are less than only my husband’s income?!?!”  It seemed like an impossible task.

Making the Leap: How We Tested Our Ability Before Actually Doing It

After I figured out how much money we should spend in each household category based on a single income, we started pretending we only had access to my husband’s salary and saved every bit of mine.  Every pay period, we would transfer my entire paycheck to savings, even though we knew we were risking bouncing checks.  We wanted to make the trial run as realistic as possible. It was super difficult to resist the urge to spend that extra money like we used to, but we stuck with it.

We did this for approximately a year and a half before our first child was born, tinkering with the one-income budget along the way, and transferring money from savings into checking when we absolutely had to in order to cover large expenses / overspending on occasion.

Lessons Learned About Budgeting: Spend Consciously, Be Disciplined

I love writing about financial smarts because I have been in a place of financial stupidity and want others to learn from my mistakes.  I learned that being successful with money management oftentimes boils down to self-discipline and a desire to make conscious decisions about where your money is going.

If you can see yourself in my story above and want to give living on one income a try, I recommend focusing on the simple act of setting up a budget.  Making a budget is a good starting point.  You can use it to take a snapshot of your actual spending habits before you determine monthly limits, track current monthly expenses, or even project net income into the future.

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