6 Big Changes When Going from Dual Income to Single Income
When we were expecting our first child, we knew life would look different than the first years we were married. We moved into our first house and began preparation for welcoming our son home. As we considered our options and the costs of continuing as a dual-income family, we decided for my wife to stay home. Those decisions are never easy. And it meant pausing career aspirations while she stayed home to raise our children at a time when dual income was growing in popularity.
But children are not the only motivation or life circumstance that necessitates the need to change from a dual to a single-income family; illness, a disability, or even caring for aging parents are all reasons for making the change. But going to a single income can be a bit of a "shock to the system" if you are unprepared. Consider these significant changes going from a dual income to single income family:
1. Emergency Fund
The emergency fund is a logical place to start when considering a move from two incomes to one. Art Rainer’s Money Milestone #5 recommends 3-6 months of living expenses set aside for a job-loss emergency. You may think you need even more than the recommended reserves, but you may actually be carrying less financial risk as a single-income household. Here’s why. As a single-income household, you may have the flexibility to deploy the second spouse into the workforce in the event of financial difficulty. This means having extra reserves above your actual cash reserves. In this way, single-income families may be better positioned to navigate financial hardship than dual-income families.
2. The Budget
The second significant change to consider from dual to single income is having a budget. This change means you have an excellent opportunity for a clean sheet budget as you discuss your needs and priorities as a family. You will continue to do some activities, but others will need to be cut. That’s OK. The important part is ensuring everyone is on the same page and understands the game plan. So, what should your priorities look like? Your income must cover your housing, utilities, transportation, and food. You can expect some of the most significant changes within these four categories.
Let’s consider your housing first.
Your home is the most significant expense and needs to be right-sized with your income. Whether you rent or have a mortgage, your payments must be less than 30% of your take-home pay. And be sure to include property taxes, homeowner association dues, and insurance in that calculation. Because housing takes up a significant portion of your budget, any action you can take to reduce that expense will help you manage other areas of your budget. Here are a few actions to consider:
(a) While living with a dual income, save the second income as your home down payment to reduce the mortgage payment as much as possible.
(b) Consider home-schooling to avoid the high cost of real estate in high-demand school districts.
(c) Become an avid DIY learner to do as much home maintenance as possible. (You don’t need to become a licensed plumber, but learning simple maintenance tasks at home will save you thousands!)
Utility expense is one area that could potentially suffer for single-income families, especially if one spouse stays home to raise the kids. It means using more electricity, gas, and water. There are ways to help reduce those expenses by using LED bulbs, smart thermostats, and limiting water usage as much as possible, but the bulk of your savings will come from non-traditional utilities. This means exploring ways to save on your mobile phones and plans, internet, and streaming services. This is a great time to explore what you really need and find services that will fit both your budget and your needs.
In our world, we need transportation. However, providing transportation does not have to be a huge expense or a burden. While the general rule of buying used cars and avoiding auto loans applies to both dual and single-income families alike, shopping for better car insurance rates might be worth your time as a single-income family. Car insurance is complicated and varies by state, so consider an insurance broker who can shop around on your behalf and get you the best deal while ensuring you have the right insurance for your needs and situation.
As a single-income family, you will likely need to think differently about how you eat. While there may be room for eating out occasionally, buying groceries and preparing your meals will help your paycheck go a lot further. This can also be a great time to experiment and try new recipes with your family. Check out the growing list of online communities and blogs that share unique and affordable ways to prepare a home-cooked meal. The food will taste great and be healthier than prepared restaurant food.
Moving from a single-income to a dual-income family can be an exciting moment for your family, but it can also bring lots of change and worry. This is the time to trust in the Lord for your daily provision. Matthew 6:31, “Therefore do not be anxious, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ For the Gentiles seek after all these things, and your heavenly Father knows that you need them all.” If you are struggling to make ends meet or need help reviewing your budget as you transition from a dual-income to a single-income family, seek the help of a Certified Christian Financial Counselor who has been trained to help.
About the author: Nate Sargent serves as a financial counselor in the Greenwood, Indiana area. Nate holds an MBA from Colorado State University and a Certificate in Financial Planning from the Ron Blue Institute at Indiana Wesleyan University. Nate also holds an Electrical Engineering degree from Purdue University and has been in the aerospace industry for over 25 years.