Moving from two incomes to one can be a difficult transition to make. Sometimes this is a planned event while other times it comes from an unexpected job loss. Whatever the case may be, some simple planning can make this transition go smoothly.
Assess Your Situation
It is important to fully understand the consequences of the situation in order to make the appropriate changes in your life. How much money will actually be foregone by removing one source of income? Will this have any effect on health insurance? What are the non-monetary ramifications that could come from this situation, good or bad?
When This Change is Done For a Child
One reason many families decide to move from two incomes to one is for one of the parents to stay at home with the new child. When this is the case you need to factor in not only the income that is lost by removing an income but also how much money will be saved in child care costs.
Depending on your location and the type of care required it can cost anywhere from $5,000 to $15,000 a year per child for daycare. After factoring in the potential daycare costs from the actual income that is being lost the financial impact may be less severe than initially thought.
Cut Expenses to Ease the Transition
The first step in making this transition is to reduce expenses. Hopefully you have created a budget and know where you can make the biggest cuts, but you should start with the non-essential expenses first:
- Television and Internet Service. Do you have digital cable or satellite service? You could save hundreds of dollars a year by downgrading your package or eliminating it altogether.
- Telephone Service. If you have a land line plus multiple mobile phones, you should look at reducing the number of phones you have or consolidating all of your phones into one plan.
- Dining and Entertainment. If you have a habit of going to the movies or out to eat frequently, this can be a significant money saver. Keep dining out to a minimum and look for low-cost activities for your family.
- Automotive Expenses. When both members in the relationship work, it is almost necessary to have two vehicles unless you live in a metropolitan area with extensive mass-transit. With one less person commuting to work it could be possible to eliminate a vehicle altogether or at the very least trade in a newer vehicle with monthly payments and high insurance costs with a cheap used car.
- Mortgage or Rent. As a last resort, after cutting as many expenses as you can, it may be time to consider refinancing your mortgage or finding a place to live with lower rent.
Generate Income at Home
In addition to cutting expenses, you may also be able to find ways to generate income even while at home. Consider holding a yard sale to not only clean out your basement or garage but to generate some spare money as well. You can take this a bit further and even head online to eBay or Amazon to sell some of your old items.
If you have a hobby, you can see if there is a way to turn what you do into cash. If you enjoy working with wood or knitting clothing, you might be able to take some of your products to a local craft sale.
