I gave my notice at work this week.
Three weeks from now I will be taking on the role of full-time blogger, child taxi driver, and housecleaner (my own house, of course). While it’s exciting, it’s a bit nerve-wracking as well. You see, while I do currently make money running this blog (thank you all for your support!), I am nowhere near the point of being able to completely cover the income I’ve been making working my 9 to 5 job.
Tip: Want some help closing the gap between your income and your expenses? Grab my free worksheet HERE.
How To Live on One Income (When You are Used to Two)
And yet, we’ve planned, prepared, and are ready for the challenge, and I’m excited to provide some tips for those contemplating a similar change, for one reason or another.
Step 1: Determine How to Cover Day-to-Day Expenses
Ultimately, losing an income means rethinking everything related to your financial situation.
Revamp the Budget
You know that budget you put together to keep your expenses below your income? If you are contemplating leaving one income behind, then it’s time to revisit that budget. Personally, I use the Blessed Budget Planner and by doing so it was really simple to eliminate my income from the scenario and see how much we would need to cut from other areas of our budget to make it work. Of course, you can do this using whatever method you currently use for budgeting, or simply write it out with pencil and paper.
I personally ran three different scenarios (with different end goals) to ensure that we could meet our needs without my income. In each scenario, I removed my income from our budget and distributed the rest of our family income to the appropriate categories, based on importance. If it didn’t fit in the budget, then we discussed the pros and cons of getting rid of some of our “luxury” expenses.
When you go about calculating (estimating) that new budget, make sure you start with guaranteed income. In our case, I started with the base (lowest) amount of money that my husband will make in any given month. As a teacher, he often receives stipends for additional work completed, yet I did not include those in our budget. If those extra monies are ever eliminated, I don’t want that to mean financial failure for our family.
Additional Resources:
The Art of Family Budgeting
11 Things to Consider When Starting a New Budget
Calculate Every Expense
Make sure you are calculating EVERY expense you might incur over the next twelve months. Plan for a year, and by then you will have dealt with every season of that year, the expenses that come with each one, and will be confident and ready to face the following year (or willing to get that job back).
Of course, those expenses will include housing, utilities, food, and clothing, but it can be easy to forget about the little things that come up during the year: car insurance premiums, taxes, car licensing fees, back-to-school supplies, and swim lessons. To ensure success, make sure you have carefully considered each season of the year.
Give Yourself Wiggle Room
If your expenses equal the exact amount of income you make, then you may be making a mistake in leaving that second income behind. In looking at our budget, I made sure we had a bit of wiggle room in each category so that if an extra medical expense comes up, or a child loses the shoes I just purchased, we won’t be sacrificing our grocery budget or utility payment in order to cover those costs.
Plan ahead, because it will happen to all of us at one time or another.
Additional Resources:
School Year Budget Survival Tactics
Grocery Budget Survival
Step 2: Plan for Catastrophe
I don’t know about you, but the moment my budget seems to be going along like it’s supposed to, we find ourselves dealing with a major plumbing issue or a car in need of an overhaul. Don’t step lightly into this single income plan if you haven’t planned for those kinds of catastrophes. In our case, I made sure to double our emergency fund and pad every other “fund” in our budget to some degree to offset any additional expenses.
I’m not saying it was easy to come up with that additional money. Rather, it took sacrifice to make sure that all of the money was there so that if something, like clogged pipes, happened, then we wouldn’t be left with additional debt or unable to fix the situation.
Additional Resources:
Do You Need An Emergency Fund?
Step 3: Prepare for Health Insurance Costs
The thing about giving up a job is you often leave the benefit of employer-supplemented health insurance. Before you quit that job, determine how you will provide insurance for yourself and your family. In our case, Justin’s employer offers a fairly comparable health plan, so I will just be added to that.
Additional Resources:
How To Navigate Health Insurance
Step 4: Give it a Trial Run
You have your plan in place and are ready to type up that letter of resignation, but first and foremost, you need a test run. Spend two to three months making sure that you can actually live on one income. You can use the additional income to pay down debt, pad your emergency fund, or add it to any other categories of your budget for future use.
If for any reason the budget you’ve created isn’t working for you, it will give you some time to get it right before you don’t have the extra income.
Practice makes perfect.
Step 5: Address Your Future Plan
It’s easy to get to this exciting moment of finding freedom from the 9-5 job without actually putting a plan together for your future after that date. Don’t make that mistake.
Goals
Leaving a job behind might actually mean that you’ve achieved a financial or personal goal, and with that, it’s time to address what your goals are going forward, and how you will continue to maintain momentum with those you have yet to achieve.
A few financial questions to ask could include:
- How will you continue to pay off/stay out of debt?
- What are your goals to achieve financially?
- How will you afford vacations, dinners out with friends, etc?
Make a plan for these and you may be able to steer clear of frustrating situations that could have you running back to that second income.
Additional Resources:
Making Goals…and Reaching Them
Responsibilities
Another thing to discuss among your family is what the responsibility breakdown will look like going forward. How will chores, children’s activity transport, and any other family responsibilities be dealt with? If one person has chosen to work at home full time, will the household responsibilities still be shared among everyone, or because that person is home, will they take on more responsibilities?
In our case, I will be taking on more of the household responsibilities. It’s easy enough to run loads of laundry and stick a chore in here and there on a break from my work. My kids and husband will still have chores they complete, but it should allow us to free up more of our together time to do things that don’t involve cleaning and household tasks.
However you break it down, it’s important to do so ahead of time so that conflict doesn’t occur as a result of you quitting that job. This should be an exciting time, not a stressful one.
A Backup Plan
Having a backup plan can feel, to some people, like waiting for failure to happen, but I believe it simply provides security (like your emergency fund does for your budget). In our case, I’m a certified teacher and can jump into a substitute teaching role at any given time, so if for any reason our expenses suddenly skyrocket or my blog tanks, I will have a backup plan so that our financial situation remains intact.
Moving Forward
So, it’s going to be an adventure, to say the least, but we’ve done it before, and are well aware of what it means to live on one income. I’m excited to share how it goes over the next few months and will continue to give you quarterly updates so you can stay apprised of the situations we encounter!
Have you ever had to downsize your income? Leave a comment below and let me know how it went for you!
Tip: Want some help closing the gap between your income and your expenses? Grab my free worksheet HERE.
