These days, the majority of families survive off of two incomes. Both spouses work and contribute money to the household. When one spouse loses his or her job, the family may have to temporarily get by on a single income. In other cases though, a deliberate decision is made to become a single-income family. This usually happens because one spouse wants to stay home with the children. How do single-income families do it? The key is making the right decisions ahead of time. Learn how to do so below.
Pay Off Debts
Prior to making the switch to a single income, a family should work diligently to eliminate debt. Unsecured debt should be the primary focus. Before one spouse quits his or her job, credit card balances should be slashed or eliminated entirely. Going into the new situation with a clean slate is one of the surest ways to make it work.
Get Serious about Saving
In the months leading up to becoming a single-income household, a family should save as much money as possible. The money should be saved in a high-yield savings account. There are several options out there. After making the switch to a single income, a family will have backup funds in case of an emergency.
Stop Using Credit Cards
Single-income families should avoid credit cards like the plague. Charges should only be made in dire emergencies. While living off of a single income, every effort should be made to avoid accruing new debt. Credit cards don’t necessarily have to be canceled, but they should be stored away someplace where they can’t be used easily.
Buy Used Cars
Buying a new car should be treated as a luxury. The truth is that buying a new car is one of the worst financial decisions that anyone can make, but it’s a particularly bad idea for a family that’s trying to survive off a single income. Until both spouses are working again, used cars should be purchased instead.
Once the switch to a single income has been made, the person who stays at home should devote himself or herself to finding ways to save money. Shopping around for car insurance is a prime example. It’s easy to compare vehicle insurance online, and it’s often possible to zero in on more affordable policies. Additional ways to live frugally include clipping coupons, growing a vegetable garden and going out to eat less frequently. It’s amazing how quickly those little expenses add up, and it’s important to cut as many of them out when surviving on a single income.
Don’t Try to Keep Up with the Neighbors
When a neighbor parks a shiny new car in the driveway, it can be difficult to resist the urge to do so too. Single-income families need to remember that many of their neighbors probably have two incomes. As a result, they have more disposable income. It’s important not to be distracted by these types of things.
To ensure that life as a single-income household works out well, a family should do a test run. Before one spouse quits his or her job, the family should attempt to live on the other person’s income for a few months. This is one of the best ways to determine whether it is a realistic idea.
Pete Schilling is a writer for AutoInsuranceCenter.com who specializes in personal finance and insurance topics.