When you combine finances with your significant other, it’s easy to start inflating your lifestyle if you are under the impression that you will have a higher household income. However, I challenge you to go the financially savvy route and try living off of only one person’s income.
A family who exercises the habit of living off one income and saving the other is the perfect way to get ahead on your financial goals and become less dependent on money. There are different ways to plan your household budget but if you have debt or big financial goals, it’s best to lower your expenses as much as possible and devise a strategy that will allow you to only require one person’s income to survive each month.
Once you cut your expenses and run the numbers, you can decide whether you want to live on the person’s income who earns more to allow a larger slush fund or financial cushion if you need it and save the lower income or you can do it the other way around. If you or your partner has a side hustle, you may want to start by saving the side hustle income only and transitioning to living on one income shortly after.
Whichever strategy you choose to do it, the benefits of living on only one income in a two income household can not be denied.
It Allows you to Have A Larger Emergency Fund
What better way to bulk up your emergency fund then depositing an entire check into your savings account each month? One of the hardest parts of building an emergency fund is finding the income to contribute to it regularly.
Saving takes time and persistence, but emergencies can occur at any time, so it’s best to prepare your emergency fund as quickly as you can. When choosing an emergency fund goal, consider what your monthly budget is and how steady your household income is. If one of you are self-employed you may need more in your emergency fund. A basic rule of thumb is to at least include 3-6 months in your emergency fund to start.
While saving is good at any rate, if you set aside $300 per month to meet a $15,000 emergency fund goal and spend the rest of your household income on other expenses, you will only save $3,600 at the end of the year and it will take you a little over three additional years to reach your goal if you keep saving at the rate. If you can use the second income in your household to put $1250 per month into an emergency fund, you can meet your target goal within a year. Try and live off the larger income and use the smaller one to save.
Eliminate Debt
You can also live off one income and focus on crushing your debt with with the other. Personally, this is a strategy my partner and I plan to adopt this year. Personal debt, car loans, and student loans can really weigh your finances down and make you feel trapped.
As soon as the opportunity arises, it’s best to create a plan of action to eliminate your debt once and for all. It will still take some time and dedication, but following this strategy will help equip you with enough funds to properly contribute extra payments toward your debt to reduce the amount in interest that you’ll have to pay over time.
For newly married couples, the shock of the results of combining your debt may seem overwhelming. If you have $20,000 in student loans and your partner has $40,000, that could be a big pill to swallow. Instead of paying off your debt separately because you want to feel responsible for it, combine forces and increase your success rate at paying your debt off aggressively so you can move on. Start with interest debt like credit card debt and personal loans, then work your way down to lower interest debt like student loans.
Achieve Your Goals Faster
Aside from growing your emergency fund and getting rid of debt, simply saving the second income in your household will help give you the drive and motivation to meet any other financial goal. Managing money can be rough at times and it’s not uncommon to feel financial burnout after you’ve been working toward a goal for so long.
When you aren’t seeing much progress or it seems like your end goal is so far away, it’s easy to lose motivation and even contemplate giving up. Your goals and sacrifices can seem like more or a reality when you are putting larger amounts of money toward it and speeding up the process.
Take buying a house for example. My partner and I haven’t even started setting money aside for this yet, but it’s daunting to think that we may need anywhere from $30,000 to $45,000 just to put at least 20% down on our home. That could take several years to save up when you’re only working with one income, but if we dedicate one of our entire paychecks to this goal each month, that could severely boost our motivation and shave several years off our timeline.
Peace of Mind
While money definitely doesn’t buy happiness, it can help give you peace of mind. If you or your partner happen to get sick or have an emergency, you can always look toward gathering money from your 2nd income before even touching your emergency fund.
Or, if the unthinkable happened and you or your partner got laid off from work, you wouldn’t have to make a huge adjustment for the time being if you were already comfortably living on one person’s income. On the other hand, if you spend every last penny of both incomes each month, losing a job might seem like a catastrophe.
You can avoid that and give yourself so much peace of mind when you fully commit to living well below your means and reaping the benefit from that.
With all the benefit that can come from living off one person’s income and saving the other in a two income household, have you tried it yet? Why or why not?
Chonce is a freelance writer who’s obsessed with frugality and passionate about helping others increase their savings rate, eliminate debt, and work toward financial stability. She chronicles her journey to becoming debt-free on her blog, mydebtepiphany.com.
