Whether you are single and living on one income or a couple who has decided to switch from a two-income household to one, it can be challenging to live on just one source of cash flow. You may lose some of the financial freedom you had with two incomes, but just because it is going to be a little bit more lean does not mean it has to be a financial disaster. Here are some things to keep in mind when you're budgeting with one breadwinner:
Make Sure You Have an Emergency Fund
While an emergency fund of 3-6 months worth of income is essential for anyone, it is especially important for singles or families living on a single wage. You still have to prepare your bank account for the unexpected, like losing your job, emergency medical expenses, or an unforeseen home repair. If you have not yet transitioned from two incomes to one, you might want to make sure that you have 3-6 months of income saved before there is only one earner in the house. If you are single, I would recommend saving up enough money for an emergency fund before using your savings on luxuries like going on a trip or getting a new car.
Get Rid of Debt
Next, you will want to make sure you get rid of any debt you have as quickly as possible. You will want easy access to as much of your income as possible since you will just have one paycheck coming in, and you don't want all that cash going out to pay off debts as soon as it comes in. Paying off that student loan or expensive car before you switch from two breadwinners to one could make a huge difference in your standard of living as a single income household. If you are still single, paying off your debt sooner rather than later will give you the financial freedom later in life when you want to take trips, get married and raise a family, and so on.
Figure Out Ways to Cut Costs
It is important to cut costs no matter what your monthly budget is, but you definitely will need to figure out a new budget when you size down from two incomes to one. See where many of your expenses are now and where you might be able to cut back. Maybe you have Netflix for four screens, but you really just need it for one. Maybe you are spending a lot of money eating out. Maybe you can turn down the thermostat when you are at work in the winter and up in the summer to save some extra money on your heating and cooling bills. No matter what it is, figure out what you have to spend and cut out anything that is not essential. If you are single, you may need to adjust your budget just to account for savings goals like making a trip out to see your first nephew or going on a cruise to Spain.
While living on one income presents its own challenges, it can also be extremely rewarding. You have the opportunity to figure out where you really want to spend your money, and it will allow you to focus more on spending time with your family and friends, putting more focus on relationships and less focus on money.