How to Prepare for the Switch to a Single Income

How to Prepare for the Switch to a Single Income

Photo courtesy of Nana B Agyei

When our first son Aiden was born, my wife made the switch from full-time employee to stay-at-home mom (though with a kick-ass counseling practice on the side).

It was a big deal. Not only were we adding all the expenses of a newborn, which we had zero experience with, but we were adding the financial and emotional stress of switching to a single income. That’s two big changes all at once.

Of course, we’re far from the only ones who go through this. Pretty much all new parents at least consider having one person stay at home, and many parents who go back to work start having second thoughts at some point about whether one of them could stay home.

So, whether you’re having your first child or you already have kids, I want to give you a simple way to make the transition to a single income a little easier and a little less stressful.

Step 1: Ballpark your new expenses

It’s pretty likely that your spending is going to have to change when you switch to a single income. If you’re doing it at the same time as you’re adding a child, you’re obviously going to have new expenses for the baby. But no matter what, the reality is that you’re going to have less money coming in and therefore probably won’t be able to afford as much money going out.

So the first step is to estimate what those changes are going to look like. Now I’ll be honest with you: you aren’t going to get this exactly right. It’s impossible to know exactly what your spending is going to look like in this new situation until you’re actually there, but you can get in the ballpark enough to start preparing.

First you’ll need to get your baseline: what does your spending look like today? If you’re already either keeping a budget or tracking your spending, you’ll have a good sense of what you currently spend in a typical month. If you don’t already know those numbers, I would suggest following this process to get a handle on it: How I Track My Spending.

Then you’re going to have to think about two different types of changes:

  1. New baby expenses, and
  2. Reduced spending based on reduced income

1. How much will the baby cost?

If you’re having your first child, this is the million dollar question, right? The honest answer is that there’s no way to know for sure ahead of time, but you can definitely work on getting a reasonable estimate.

Babycenter has a good tool that will show you some national averages. This can be a good place to start: Cost of Raising a Child.

But those are simply average numbers that may or may not reflect your personal situation. When we were prepping for our first son, I went through Babycenter’s numbers and took things out or added things in where it made sense for us. For some specifics on how our situation differed from the average (and how yours might too), here are two articles that could help you out:

Here’s another tip that can make this process a little easier. When we did this for ourselves, we didn’t worry about getting incredibly specific with how our budget would change. That is, we didn’t worry about how much we’d be adding to our grocery budget vs. our clothing budget, or other line items like that. We just adjusted the annual spending number we got from Babycenter, divided that number by 12 and assumed we would average spending that much more per month. It kept the process much simpler.

2. How will your other expenses change?

Of course, adding a baby isn’t the only change here. One of you is switching from a full-time job that pays you money to a full-time job that doesn’t. That’s going to bring up it’s own set of changes in spending.

Some of your spending will change naturally as a result of your change in daily habits. Maybe you spend less on gas getting to and from work, but maybe you spend more on electricity since you’re home more of the day. You’ll almost definitely spend more on life insurance, but you’ll probably also spend less on going out (trust me, you’ll be too tired).

Other spending will probably have to decrease simply because you’re going to have a smaller income. Those specific choices are going to be up to you, but you’ll have to look at your new income, the new expenses for the baby, and see if there’s any part of your budget you should be planning to cut back on.

Step 2: Start living on your projected expenses and save the rest

Okay, so now you’ve got some idea of what your budget will look like once the baby gets here and you’re living on a single income. That’s a big step, but it’s not the end.

Now what you can do is start living on that new budget a few months before you actually have to make the switch. This will do two big things for you:

You get to iron out some of the kinks BEFORE you actually have to make the switch

Living on a smaller income is going to take some teamwork. It will probably be a difficult transition financially as you have to adjust to new habits and new spending patterns. It may also be a difficult transition emotionally. When two people start fully sharing the money that one person is earning, there is plenty of room for hard feelings to enter the picture on both sides.

It’s best to try and work on some of these issues BEFORE you’re also dealing with the stress of actually having only one income. And if you’re also making the switch at the same time as you’re adding a baby? Well, you’ll have enough to worry about there that having a handle on the day-to-day financial stuff will be a big relief.

You can build up a savings buffer

If you’re having a baby then you’ll definitely have some new expenses there. But on the whole you’ll probably be spending less once you switch to a single income simply because you’ll have less money to spend.

So during this trial period, when you’re living off one income but you still actually have two, you should have some extra money coming in that you can funnel into a savings account. That extra savings will give you a nice little cushion that can take some of the stress away from the transition. Like a little extra emergency fund to help you navigate those first few months.

We started doing this about three months before our son was born, but it would have been nice to start a little bit sooner and build up a little bit more of a cushion. The earlier you can do it the better. The worst that happens is you build up more savings than you actually need (whoops!).

Good luck!

Living off a single income certainly isn’t for everyone. Some families need both incomes to make ends meet. And some parents just love their jobs too much to give them up.

But if the idea of staying at home is appealing to you, use these tips to give it a test run before you dive in. The worst case scenario is that you build up a little extra savings before returning to business as usual. But if you do end up making the switch, this preparation should make it a lot easier.

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12 Comments... Read them below or add one of your own
  • Brian @ Luke1428 June 2, 2014

    Step 2 is a great idea Matt! Best to live on the projected income for several months to see if it could actually work. It would be terrible to quit your job and then realize you couldn’t live on one income.

  • Done by Forty June 2, 2014

    Another classic for me to bookmark in my “future kids” folder. Thanks, Matt. We’ll be potentially going to one income in the near future, depending on the kind of funding/TA-ship that Mrs. DB40 gets in the coming years. And who knows how long I’ll be able to keep my job! I suppose we’re always on the verge of losing any single source of income.

    • Matt Becker June 3, 2014

      Well, considering your 70+% savings rate, you guys should be in pretty good shape no matter what happens! But it’s still an adjustment no matter what, and you’re right that any single source of income could be lost really at any time. Just another reason to get used to living below your means.

  • I agree with Brian…Step 2 is a great idea. That’s the best way to know that you can do it…and to prepare you for it. My wife and I were originally going to become a one-income family, but an opportunity for my wife arose. We might re-evaluate in the future to see if we should go that route.

    • Matt Becker June 3, 2014

      It’s definitely not an easy decision, especially when you enjoy the work you’re doing. But a trial run can definitely help you figure out what it would be like at least from a financial perspective.

  • Great and thorough as usual, Matt. Now that we’ve actually decided to live off of one income (as opposed to just having one income 😉 ) we have found it fairly easy to adjust to simply not spending in areas we were used to spending in, like going out to eat. It’s been well worth the sacrifices, too.

    • Matt Becker June 3, 2014

      I’m with you. The changes are usually a lot easier once you actually make them than they might seem ahead of time. Especially if you’re also adding a baby, the simple truth is that you don’t have the time or energy for a lot of the things you spent money on before. It’s a gift and a curse!

  • Holly@ClubThrifty June 3, 2014

    We’ve never lived on one income but it often makes sense to do so. I know some women who would pay so much for daycare that they would actually lose money by working =/

    • Matt Becker June 3, 2014

      Oh yeah, daycare can be crazy expensive. And after taxes and everything, you’re dead on that sometimes going back to work actually loses you money. Kind of a crazy reality.

  • Jon @ Money Smart Guides July 18, 2014

    Before I moved to blogging full time, my wife and I started to save my entire salary. We also reviewed all of our expenses and made cuts to some and negotiated others to save some more money. Now that kids are in the near future, we are back to saving all of my income (and some of hers) so that we have as much saved and are as prepared as possible for the curve balls life is going to throw at us.

    • Matt Becker July 20, 2014

      Sounds like you guys are making the right moves. Thanks for sharing!

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