Do you dream about quitting your job and staying home with your kids? If so, you’re not alone. For some women, their family’s financial circumstances make it easy for them to leave their jobs.
But for many others, giving up an income requires intense planning and serious sacrifice. You don’t want to plunge your family in financial uncertainty by quitting your job without a game plan, so regardless of your family’s financial situation, here’s how to prepare to safely move from two incomes down to one.
How to Transition From Two Incomes to One
1. Make a budget
Until you have a firm grasp of your whole financial picture, you can’t comfortably (or wisely) make the decision to give up an income. List your monthly income and expenses – and if your expenses exceed your income, find ways to reduce those costs. At the same time, it’s important to be realistic and not cut down expense categories too far.
Let’s face it: no matter how motivated you are to be frugal, you’re not going to feed your family of four on $50 a week. You’re going to spend way more than $20 a month on diapers for your newborn.
You’ll need to put gas in the car on a regular basis in order to take your child to the park and get her outside a few times each month. Review each budget category carefully to make sure you feel like the amount you’ve allocated is a realistic reflection of your actual spending.
2. Live according to your single-income budget for at least three months
Now that you’ve established a new single-income budget, it’s time to live on it – with the safety net of your second income. Keep working and earning two incomes, but carefully track your expenditures and live only on the income you intend to keep.
Put the entire amount of the income you plan to give up into savings – less any childcare, dry cleaning, or other expenses specifically related to maintaining that job. Do this for three months to prove that you can live according to your reduced spending plan.
If you find that it’s difficult, re-evaluate your initial budget. Make adjustments to your spending categories, work to reduce your bills (for example, cut cable TV or eliminate dining-out trips), and see if it’s still possible to live on one income.
3. Pay off as much debt as possible
Since you’ve saved your entire second income for three months, use that money to pay off debt to reduce your monthly expenses even further. Can you pay off a credit card? Eliminate a car payment? Reduce your student loan balance? The more debt you can pay off now, the less you’ll have to pay out monthly when your income is reduced.
4. Establish a six-month emergency fund
Revisit your initial budget and pare it down to the core. No cable TV. No sports fees for the kids. No preschool tuition. No “miscellaneous” spending category or allowance for haircuts.
This is your emergency budget and reflects only the expenses necessary to keep your family safe and fed in the event of financial emergency or job loss. It includes categories such as “rent/mortgage,” “groceries,” “utilities,” and other essentials only.
Add up the categories to establish the bare minimum amount of money you need on a monthly basis to get by. Establish a savings fund large enough to cover this “emergency budget” for six months.
In the event of an emergency, you’ll be glad you did. And in the months you don’t need it, you’ll find that it will provide peace of mind just to have it there.
5. Brainstorm ways to fill the financial gaps if needed
Perhaps, after developing a budget and practicing living on a single income for a few months, you’ve determined that there is a noticeable gap between your monthly income and your monthly spending. The great news is – it’s still possible to quit your job. It will just require a little effort and creativity on your part.
Brainstorm ways that you can fill in the financial gaps from home. Are you crafty and can sell things on Etsy? Can you run a photography business on the side? Are you able to watch a neighbor’s child before school? There are lots of ways to make money from home. Figure out what will work best for your family.
To sum it up
I know it’s hard to go through a lengthy preparation process when you just want to quit your job now. But without adequate planning, your time at home can be riddled with financial stress and anxiety.
Instead, by laying the proper groundwork, you’ll have both confidence and peace of mind when you give up your second income, and you’ll be able to focus on exactly what you want – precious time with your kids.
About the Author: Jenny is a mother of two, doing her best to become more frugal. She loves making lists and helping others find what they are looking for. You can find her blogging about her struggles with breastfeeding, breast pumping tips, parenting hacks & more at Mom Loves Best.
Julie Wood says
It can be tough in today’s world to go from two income to one. But when kids are involved and day care and travel expenses then it is important to see how one income can work. Budgeting and saving is so important.
Sarah L says
Very good tips. I think everyone who can should have a 6 month safety net savings account.
These really are great tips and much needed. Sometimes my husband doesn’t’ get as many hours as planned so we have to budget and use some of these same tips you shared here. I be this will help many families survive financially when two incomes become one!
Jen Temcio says
These tips are incredibly helpful and gave me some really good ideas. We are in this mode right now and every little bit adds up fast! Going to adjust my budget a bit today!
Diane Hoffmaster says
We did this when we had our first child. And I have been at home and/or working part time at night or running my own business ever since. I wanted to be home with my kids and we had to cut some serious corners in our budget those first few years but we made it work, thankfully.
These are great tips that we have actually done when we first got married and started our family. Once we got the hang of things and stuck to our budget, living on a single income was doable.
Cynthia R says
We were actually just talking about trying to live off of my income and save all of his income. Unfortunately it will have to wait until we get some debt paid off but it’s definitely our goal.
Great budget guide. And a must read for new parents.
You’re an angel for sharing this. Big hugs!