While there are certainly downsides to living on one income, our family finds that there are also plenty of advantages to such a situation. This doesn't however mean that it's easy to sustain a fairly normal lifestyle on half the amount of money that my wife and I used to earn. Therefore, there are certain sacrifices that we must make or things we must do to help us maintain our lifestyle and do so on a significantly reduced income compared to what we used to make.
Whether we live on the equivalent of one income or two, a budget is a pertinent aspect of our financial lives. But we don't just set down totals for various expense categories and hope that we hit them. Instead, we keep a running total of expenses that continue to keep us on track throughout the month rather than arriving at our totals at the end of the month only to realize we've overspent. When things are tighter on just one income, it's helpful to know whether we need to cut spending a week or two in advance of the end of the month to stay on track.
We wouldn't be as successful in our budgeting efforts though if we didn't track our expenses. I make sure that we track our costs when it comes to just about every aspect of our lives. While I'm better about this than my wife is, we still manage to do pretty well as a combined expense tracking team. By knowing where we are on our expenses at all times, it makes it much easier to compare this amount to our budget, which in turn helps keep us on track when it comes to our spending.
For example, if we've budgeted $2,000 for our all our costs in a particular month, and by the third week of that month we've already spent $1,600, with a guaranteed $300 in bills still to pay, we know that we're going to be cutting it close. Therefore, we might want to cancel or delay that family dinner out we had planned or cut back on similar controllable costs, especially when it comes to entertainment items, at least until we're sure that there won't be any surprise expenses before month end arrives.
Debt can add additional costs that we don't need to be dealing with on the equivalent of one income. Paying mortgage interest, credit card interest, car loan interest, and similar debt-related costs would only add to the amount of expenses with which we must deal on a monthly basis.
While we own our car outright, and we avoid credit card interest by paying our balance off monthly, and we use cash for many purchases, up until recently we did have a mortgage on our home. By downsizing our home though to a smaller, less costly condo, we were not only able to cut our living expenses significantly, but we were able to eliminate the need for a mortgage, saving us around $600 a month in interest each month.
Maintain an Emergency Fund
Living on what equates to one income can mean that margins are a bit tighter and there is less wiggle room when something goes wrong financially. While it can be harder to maintain an emergency fund on one income, we make an effort if or when we do have to dip into our emergency savings to rebuild them as quickly as possible.
Our debt avoidance helps in this area as we have more cash to put toward such savings since we're not putting it toward interest on debt. This way, when car repairs, home repairs, medical expenses, or similar costs arise, we're ready without having to go into debt to handle them. The recent birth of our second child -- and the thousands of dollars in baby bills that came with -- is a perfect example of how this emergency savings helped us cover extensive costs without having to struggle too excessively on just one income.
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