This article was first published in 2008. But the message is still relevant today.
Going to one income?
We’re going to one income very soon.
This is the last month that we’ll receive two paychecks, as Mrs. PT will be going back to school next month. I decided I would do a little preparation. I did some research and came up with 9 tips for going to one income:
1. Reorganize Your Banking Situation
If you’re like me, you have multiple bank accounts. One for each spouse’s paycheck. These two accounts likely have their own direct deposits and outgoing automated bill pay and withdrawal. In order to ensure you don’t incur any NSF fees, you’ll need to adjust your automatic bill pay and withdrawals. Next week I’ll share how I moved my bill pay to Capital One 360‘s checking account. (subscribe and never miss a post)
2. Re-adjust Your Retirement Contributions
Since you’ll likely lose the ability to contribute to one of your retirement accounts (401(k), 403(b), Stock Plan), you’ll need to make up for it using an IRA, or adjusting the income earning spouse’s contributions. We’ll lose the option of contributing to a 403(b). I plan to supplement that by maxing out a Roth IRA by next April and by increasing my 401(k) percentage.
3. Know Your Finances
Beyond banking and retirement, make sure you have a full understanding of your financial situation prior to pulling the plug on the second income. I recently built a dashboard view of my finances. Using something like this or a simple pen and paper budget accounting for your new income and expenses will give you confidence in making the move.
4. Get Serious About Reducing Unnecessary Expenses
If, after you analyzed your finances you realize things are going to be tight, it’s time to get serious about reducing your expenses. Start with the unnecessary items like dining out and luxury items. Learn to live a frugal life.
5. Consider Going to One Car
While we’re discussing reducing expenses, if going to one income means that a spouse will now be at home, consider selling one of your cars. We’ll be keeping our second vehicle because Mrs. PT will need to commute to school, and because here in sprawling Dallas it’s really hard to go without two cars.
6. Make a List of Frugal Things You Can Do
The last thing you want to do is shut off one income and increase your expenses because you’re spending more out of boredom. Check out your local library and community event calendar for good ideas.
7. Consider Working from Home
If you’re making the move to one income to stay at home with kids, consider doing some part-time work with a few free hours you may have.
8. Make Sure You’re Still Insured
Don’t forget that the loss of a paycheck usually means you’ll be losing benefits as well. Health insurance is something you may need to switch to the other spouse.
9. Adjust Your Tax Withholdings
Here’s a plus. Moving to one income means you’ll likely pay less in taxes. Consult your tax professional and see if it’s necessary for you to adjust the withholdings on the remaining income.
Should You Go to One Income?
Of course, the financial aspect is only one portion of it. There are many great reasons for going to one income. I believe a majority of us can make the move with just a few sacrifices.
As always, I don’t know all the answers. I couldn’t think of a 10th tip for going to one income. If YOU have one please leave it in the comments below.