The number of U.S. households with dual income has risen from 51.9% in 2010 to 53.3% in 2019. According to the Bureau of Labor Statistics, however, 61.1% of married couples with children have both parents working. At least one parent in 97.4% of married-couple families with children was employed in 2022, and 65.0% of these families had both parents employed.
Of course, this isn’t all that shocking.
MagnifyMoney senior content director Ismat Mangla points out that dual-income households in the U.S. have been increasing for decades. As a result, it is not surprising that this trend has continued during the past decade.
One reason for this increase can be attributed to the Great Recession that started late in 2007 and lasted until June 2009. This resulted in many young adults having difficulty finding employment during this period, which prevented them from paying off student debt and saving for the future. Playing catch-up may have been easier with two earning members in the household.
Moreover, Mangla says more and more families need two income earners to remain middle class. The cost of housing and child care has continued to rise while wages have remained relatively stable.
“However, at the more affluent end of the spectrum, often the desire to maintain a certain lifestyle pushes couples to earn dual incomes at the expense of time,” Mangla notes.
In general, dual-income households experience less financial stress and higher incomes. However, sacrifices must also be made. A dual-income couple, for instance, tends to have higher fixed costs as well as a more difficult time balancing work and family obligations.
With that said, here are some tips and strategies to help you successfully live on one income.
1. Take it slow at the beginning.
The cold-turkey approach rarely works when trying to quit a bad habit. Rather, take your time and make a plan.
“To begin weaning yourself off the second salary, take stock of your expenses,” says Snigdha Kumar, personal finance expert and head of product operations at Digit. In order to prioritize your spending, Kumar recommends categorizing your monthly expenses. “Identify the ‘must-haves’ and eliminate some of the ‘nice-to-haves’ and consider paying the ‘must-have’ expenses with the higher salary,” she advises.
Kumar recommends using the higher salary ($50k) to pay for living expenses and saving the other towards retirement, an emergency fund, or a down payment for a house.
“Many dual-income families take on expenses based on the money both partners earn. There is nothing wrong with this approach, but if couples want to turbocharge their finances and gain some form of financial independence, make sure a single salary can cover basic living expenses,” she continues.
2. Update your budget.
It is helpful to figure out your new monthly budget before you downsize to one paycheck, so you can make any necessary adjustments. Take into account how much you’ll save by not having to commute, buy dry cleaning and lunches, as well as other expenses you’ll stop having, such as child care.
Budgeting should not only include your day-to-day expenses, but also your savings plan. For example, long-term goals, such as retirement, should be saved. You may be eligible to contribute to both employer-sponsored retirement plans and individual retirement accounts (IRAs) if you’re married and file a joint federal tax return. Nonworking spouses may be able to contribute to separate, tax-advantaged spousal IRAs.
3. Live below your means.
Arguably the most important thing you can do is live below your means if you want to survive on one income. In other words, you should spend less than you earn. Although it may take some time to adjust your lifestyle, it will be worth it in the end.
In order to reduce your expenses in various areas of your life, here are some suggestions:
Housing:
- Move into a smaller house or apartment if you can.
- If you own a home, consider renting out a room.
- Find a roommate.
- Get a lower interest rate on your mortgage by refinancing.
- Pay off your mortgage early by making extra payments.
Food:
- Instead of eating out, cook more meals at home.
- Save money by buying in bulk.
- If you have the space, grow your own food.
- Don’t miss out on coupons and discounts.
Transportation:
- Whenever possible, walk, bike, or take public transportation.
- Reduce the number of trips you need to make by combining errands.
- Consider carpooling with friends or neighbors.
- Invest in a fuel-efficient vehicle.
Other expenses:
- Don’t waste money on unnecessary expenses like cable TV, gym memberships, and eating out.
- Whenever possible, look for cheaper alternatives to the products and services you enjoy.
- Negotiate your bills.
- Cancel unused subscriptions.
4. Get the most out of your savings.
When one partner stays at home, commute and childcare costs may be reduced. As a result, any savings you make from situations such as that should be deposited into an interest-bearing savings account.
Your savings account can be maximized if you follow these steps:
- Find the highest interest rate. Find out which savings accounts offer the best interest rates. Traditional savings accounts usually offer very low-interest rates. An account with a high yield offers a higher interest rate, however, which can increase the growth rate of your savings.
- Build a CD ladder. Open several CDs that mature at different times. Each month, you could open a CD for a year.
- Buy savings bonds. Unlike other debt securities, Series I bonds are backed by the government of the United States and earn interest for a period of 30 years.
- Automate your savings. Ensure that your checking account is transferred automatically to your savings account on a regular basis. As a result, you will be able to save money without even thinking about it.
5. Increase your income.
You may need to consider increasing your income if you are having trouble making ends meet with only one income source. The following are some suggestions for increasing your income to achieve this:
- Start a side hustle. A side hustle can take many forms. Among your options are freelance work, starting a blog, and selling products online.
- Get a part-time job. You can increase your income by getting a part-time job if you have the time.
- Ask for a raise at your current job. You may be able to negotiate a raise with your employer if you have been performing well at work.
6. Designate responsibilities.
In the beginning, Monica Louie struggled with the idea of not contributing to her family’s finances. By optimizing the household’s day-to-day finances, she soon found another way to contribute, even though she was no longer earning income.
“My role in taking control of our finances has allowed me to feel like I am contributing financially to my family because my husband gives me credit for staying on top of our budget to make sure we’re paying as much toward our debt as possible each month,” Louie shares.
7. Get rid of high-interest debt.
In many cases, high-interest debt, such as credit card debt, can have steep interest rates. In fact, the average credit card interest rate in America is 24.46% today – the highest rate in 2019 when LendingTree began tracking them. Buying things with plastic when you carry a balance means you’ll pay significantly more than the receipt says because you’ll be paying a hefty annual percentage rate (APR).
Here are some tips for removing high-interest debt:
- Make more than the minimum payment. Whenever possible, try to pay more than the minimum on your debts each month. As a result, you’ll be able to pay them off more quickly.
- Use a debt snowball or avalanche method. When paying off your debts, the snowball method involves paying off your smallest debts first, while the avalanche method involves paying off your highest-interest debts first. Generally, the debt avalanche method is more cost-effective than the debt snowball method for paying off debt.
- Negotiate with your creditors. It may be possible to negotiate a lower interest rate or monthly payment with your creditors.
- Consider consolidating your debt. It may be possible to save money by consolidating multiple debts with high-interest rates into one with a lower rate.
- Take advantage of hardship programs. If you are struggling financially, some creditors offer hardship programs that can help you make smaller payments or avoid interest payments.
8. Consider tax withholding.
You may need to adjust your income tax withholding due to your smaller annual income. If you increase your allowances, less money will be taken from your paycheck every month.
Consult a tax professional or contact the IRS directly if you’re unsure whether you need to adjust your withholding. In the event that your net income is affected by withholding changes, make sure to adjust your budget accordingly.
9. Be responsible when using credit cards.
If you can’t pay off the balance every month, don’t use credit, not even for gas or food. Unless you do, you will incur a growing amount of interest.
You can use the wait-and-see method before making a big, unexpected purchase by walking away for 48 hours to 30 days, and then deciding if you still want it after some time has passed. It may turn out that you really don’t need to make such a large purchase.
Are you still struggling with debt? Consult a non-profit organization like the National Foundation for Credit Counseling (NFCC).
10. Be prepared for emergencies.
The possibility of an unexpected expense always exists, even if you live within your means. Suffice it to say, that in case of an emergency, you should have a plan in place.
You can do this by setting up an emergency fund. If you lose your job or suffer a medical emergency, you can tap into your emergency fund to cover the expenses.
It is also important to have adequate insurance coverage in case of an emergency. A variety of insurance policies are included here, such as health insurance, auto insurance, and homeowners insurance.
11. Seek out free or low-cost activities.
If you want to cut expenses, you should avoid dining out, attending expensive concerts, and attending costly sporting events. Consider alternatives that are free or low-cost instead. Enjoy family walks, board games, and streaming movie nights with your loved ones.
12. Be flexible and willing to make changes.
There are times when things don’t go as planned. When you live off of one income source, you must be flexible and willing to change as you see fit.
Losing your job, for instance, may require you to reduce expenses or find a new job quickly. You may need to use your emergency fund or take out a medical loan in case of a medical emergency.
It is important to prepare and be willing to make changes when necessary. However, living off one income makes this even more important.
FAQs
Is it possible to live on one income?
Yes, it is possible to live off one income. It does, however, require careful planning and budgeting. You must be honest with yourself about your expenses and determine whether your income will cover them.
Various ways can be found to reduce your expenses, including cutting back on unnecessary spending, cooking more at home, and finding cheaper alternatives.
How do I create a budget for one income?
In order to create a budget for one income, you must first track your spending. If you do this, you will be able to see where your money is going and identify areas where you can make savings.
By learning how you spend, you can create a budget that allocates your income to essentials like housing, food, and transportation. Also, make sure you budget for savings and unforeseen expenses.
What are some common challenges of living on one income?
A single income can present a number of challenges, including:
- Making ends meet. When you have a lot of expenses, it can be challenging to make ends meet on one income. Discipline is crucial when it comes to spending and avoiding overspending.
- Saving for the future. When you are living on one income, saving for the future, such as retirement or a down payment for a house, can be difficult. No matter how small your monthly savings might be, it is important to make saving a priority.
- Dealing with unexpected expenses. For families living on one income, unexpected expenses, such as job loss or medical emergencies, can be financially devastating. Having an emergency fund in place can help you deal with these types of expenses.
- Keeping up with others. With only one income, keeping up with others can be difficult. As everyone’s financial situation differs, it is important not to compare yourself to others and to focus on your own goals.
What are some resources for people living on one income?
For people living on one income, there are many resources available. Here are a few examples:
- Government programs. People living on one income can benefit from a variety of government programs, including food stamps, Medicaid, and low-income housing.
- Nonprofit organizations. People living on one income can find a variety of services offered by nonprofit organizations, such as financial counseling, job training, and childcare assistance.
- Online resources. Budgeting tools, frugal living tips, and coupons are some of the many online resources available to people living on one income.
