How to Live on One Income as a Family (in 2021)

Times can get hard for everyone especially when unprecedented events happen that you have absolutely no control over. You may find yourself or your partner laid off indefinitely and abruptly having to live on one income or paycheck as a family. Your partner could get sick, work may be difficult to find or a contract you had could be cancelled. The multitude of reasons that could cause a family to live one income or paycheck are endless.

This guide on how to live on one income or paycheck as a family is meant to provide some tips on adjusting quickly. Most people do not typically plan to be out of work.. You may be finding yourself trying to figure out how to pay your bills over the next few months on one income or paycheck. I recommend getting this book because now would be a great time for a financial makeover.

Before we get into the tips you should answer these five questions:

Do you have an emergency fund?

If you have an emergency fund, then you are already ahead of the game. That’s because an emergency fund helps with situations exactly like this. If you find yourself laid off, you can use some of the money in the emergency fund to cover bills that are due that cannot be deferred.

Alternatively, if you don’t have an emergency fund it’s time to assess your finances to see if setting up one is feasible. An emergency fund becomes critical when you live on one income or paycheck as a family because there is no additional money coming in from your partner. That emergency fund becomes a safety net for the family in case of anything else coming up.

How much do you have in savings?

The next question is to see how much you have in savings. As a rule, you should save at least 6 months of your expenses at any given time. The reason is that if you get laid off, injured or sick and are unable to work then you have enough money to survive on for 6 months.

This assumes that if you are a couple then one of you will be able to find work in that period and if not as a family you would still not have to worry about covering your monthly expense for 6 months.

Count how much you have together in savings and then calculate how much of your monthly expenses it can cover. Start creating a strategy for saving more if you can, even as you live on one income. It’s important to ensure that if you draw on your savings to cover your expenses that you also plan on replenishing the savings accounts.

What are your current monthly essential bills?

So now that you know how much you have in your emergency fund and how much you have in savings the next step is to make a list of all your monthly essential bills. Essential bills are those bills that must be paid and cannot be deferred. These include mortgage payments, rent, insurance, car payments, food, medication, utilities and any other bill that you must pay.

Again, calculate how much those bills add up to. The goal is to ensure that you can cover them on your new income. Remember that you have lost one income and you want to ensure that you can live on one income or paycheck. Take this as an opportunity to see what you can cut back on and which expenses can be reduced.

How much is your one income going to be?

This can be a nail biter because for some couples, finances are never truly discussed, and no one really knows how much the other makes. The answer to this question will help shape any financial decisions that will be made going forward. That’s because how much income is coming in will determine how much can be paid out and saved.

Discuss this with humility and with an understanding that you are in this together as a family. At this time, it’s important for spouses to support each other and especially try not to disrespect each other. See if there are ways to increase net pay by picking up more hours if possible or reducing the deductions that are taken from gross pay.

For how long will you live on one income?

As you budget for the future and make plans assess how long you anticipate living on one income or paycheck. For some people it will be unpredictable depending on what they do for work and for some people it’s a seasonal lay off.

Answering this question helps with long term plans for the family as you know what the income expectations are for the foreseeable future. You are also able to see how long some expenses can be deferred because you are now living on one income.

After answering these questions, the next immediate actionable steps are as follows:

Cut off unnecessary expenses

Start by really looking at where your money goes. Print a few bank statements and credit card statements and analyze where you spend money. I would recommend going through at least 6 months’ worth of your statements. If you are eating out too much, then this is something you can stop immediately.

Do you have subscriptions and memberships that you don’t need or don’t even use? I am always stunned at how much money people waste on things they don’t even use. If you pay for a gym that you don’t go to accept that the psychological satisfaction that you get from it is not worth the money you pay for.

If you have an expensive phone plan that you aren’t locked into there are cheaper options that are available now. You can even use a prepaid plan that allows you to only spend what you have and never get overage charges that so many big phone companies charge all the time.

Use this post that I wrote on the things I stopped buying to save money. It will help to cut off unnecessary expenses especially when you live on one income or paycheck.

Get rid of any cash cows that you have

Cash cows are essentially things that you spend money on that do not add value. This would be expensive luxury cars, time shares, vacation packages and such. The reason is that these are assets only cost you money but never have a return on investment.

If you have two expensive cars that you don’t need sell it pay off the balance and if there is money left over fund your emergency fund or savings account. Buy more practical cars that do not have high maintenance costs that drain your limited funds.

Another thing to consider and especially if you are renting a house is if you can move to a more affordable house. There is sacrifice involved when you have to live on once income or paycheck as a family. Rent is one of those expenses that will never pay back because you never get equity. It makes sense to relocate if possible, to save money. The counter argument would be lease agreements that have a cancelation cost. However, if it costs less to cancel a lease than you would be saving it is time to move.

Save money on the necessary expenses

Saving money on the necessary expenses means starting to come up with ways to pay less for things you use and need all the time. Groceries are a great example of an expense that you cannot eliminate but that you can save money on. Use this guide on how to save money on groceries as a starting point.

Shop for cheaper day care options and consider canceling if one parent stays home. Consider thrift shopping for clothes or avoiding high end shopping sprees. In fact, if possible, avoid buying things you don’t need completely. Find ways to use supplies more efficiently to avoid having to replenish often. Start buying in bulk to save money on house supplies and always compare prices.

Remember you don’t have to buy brand name only to get good supplies. There are always good and sometimes better alternatives to brand name products that will usually be cheaper. Saving money and living one income or paycheck as a family requires a lifestyle change.

Start budgeting frugally

Note that this step requires that you start budgeting frugally. If you already budget this will be a change in how you budget because now you only have one income coming in. There will be changes required because to be frugal you would need to cut back on expenses extensively if you had one partner making a lot of money. Adopting a frugal lifestyle can be difficult but over time it gets easier and better.

If you don’t budget this is the absolute best time to start. Use this guide on how to create a budget that works, and the free template provided is a great place to start. Budgeting is critical because it allows you to see where your money goes even before you spend it. It’s a great way to control your money and your spending habits. As a family living on one income or paycheck a budget will help alleviate some of the stress associated with money.

Fix and do things yourself

When things that need to be fixed start coming up don’t be so quick to call someone to fix it. That’s an additional expense that you don’t need. If it’s something that you can google or check on YouTube for example, try that before asking someone to repair it. I have found that minor repairs in the kitchen or bathroom are easy to do just by watching a few videos on YouTube.

Another way to save money is to do things you normally paid others to do for you yourself. This would be getting a haircut, getting your nails done, cleaning your house or car, mowing the lawn, painting the house etc. Before you pay someone to do something ask yourself if it’s something that you can do for yourself.

Avoid using debt in the interim

It can be tempting to start using debt when you are in full survival mode. This approach is not great because debt is so expensive. Credit cards and personal loans are a temporary solution to a long-term problem. Caution should be used because they could lead to a huge amount of debt that you now have to finance. Only use debt when you absolutely have no other choice. As you budget do not rely on debt as a source of income. Cut back as much as you can before using debt to live.

If you use credit cards or loans, ensure that you pay off the balances in full when required to avoid penalties and interest accruing on the debt. Use this link if you find yourself in trouble to rebuild your credit. Debt can be taxing on a relationship so discuss any debt you take up with your partner. This will ensure that you also have a strategy to get out of debt if it is absolutely necessary. As a person who lives frugally, I always encourage people to pay off debt and to stay away from debt if possible.

Living on one income or paycheck as a family can be difficult and acquiring debt during the transition is tempting. Try first to see how much your income can go. Then if you have savings use them before you use debt as you rebuild your lives.

Save as much as you can

This is a simple tip that even as you cut back on expenses try to also save as much as you can and save even more than you think you can. The reason is that you don’t know how long you have to live on one income or paycheck. Jobs may be hard to find, or it may take longer for your partner to be able to get back to work.

Where possible put as much as you can into your savings. Savings are a great way to safeguard the wellbeing of your family.

Stop wasting

Americans waste so much food, supplies, utilities and money. Try to see where you have an opportunity to stop wasting because that will lead to savings. If you trash food because you made too much maybe start cooking enough to avoid spoilage and wasting. Do you buy more supplies than you need and then end up wasting them because its readily available? Assess your consumption and start encouraging the family to be more conscious. This will help with being more eco-friendly as well.

Another idea is to look at your house and how utilities are consumed. Do you waste water and power because the heat or air is always on? Is it possible to save money by being more efficient within the home? This could lead to savings that can be put back towards living life on one income or paycheck.

Call your billing companies and negotiate

This is a simple strategy where you can call your billing companies and negotiate payment plans. Alternatively, if there are options available for families that are struggling during a crisis ask about them. In some cases, it may be possible to get a better offer for services you are already paying for based on how long you have been using the service due to loyalty.

Hopefully answering these questions and following these tips will make the transition to living one income or paycheck as a family better.