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During the coming year, many families, by chance or by choice, will seriously consider the possibility of meeting their financial goals on one income instead of two. As with every major life change, this one takes some pre-planning. If you expect to make this move, here are some practical tips to consider:

Create a realistic budget
Begin by calculating the net loss your new one-income lifestyle will involve. Subtract the amount of your lost pay and then add back the money you won’t be spending anymore on work-related clothing, transportation, day care, dry cleaning, etc. And don’t forget that it may mean a reduced tax bracket for your family and a smaller obligation to Uncle Sam.

Once you create a budget, test it for a few months to make sure it’s realistic and review it regularly to keep your expenses in line with your income and financial goals.

Find ways to cut expenses
By taking a hard look at what you spend on “extras,” you may find some economies. Determine how often you eat in restaurants, treat yourself to a night on the town or shop at the mall. If the luxury of dual incomes has made you accustomed to the finer and more expensive things in life, it may be time to opt for some of life’s simple and more affordable pleasures.

Control your debt
If you can do so before you give up your second income, rid yourself of any outstanding debt. Your anticipated monthly income will benefit from eliminating those payments. By planning and prioritizing your wants and needs, you may find that you’ll eliminate unnecessary purchases and focus on what’s really essential.

Pay yourself first
Instead of saving whatever is left over at the end of the month, determine your savings goals up front, and make them your first priority. Consider doing so through a payroll deduction savings plan or contributions to a 401(k).

Look for creative financial solutions
Most people who leave the workplace miss its daily challenges. Perhaps your new situation can provide an opportunity to re-channel your creative energies into some budget-stretching ideas. For example, consider organizing a neighborhood or church clothing swap to help your own family and others find affordable children’s clothing. Talk with friends and family members about exchanging services. The possibilities are limited only by your creativity.

You may have to work a little harder to stretch a dollar in your single-income world. But, if you set your priorities and use discipline, you should find that the rewards outweigh the sacrifices - both personally and financially.

January 6, 2000

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