Living on one income doesn’t necessarily mean sacrificing what’s most important to you. By planning and saving smartly, single income families like yours can reap benefits now and later.
Having kids, paying for college, financing a home, and paying for retirement are all within reach when you follow a few simple steps.
Budget Priorities for Single Income Families
When you have a single income household, you may be faced with tradeoffs: now or later, buy or lease, and cook or eat out? These are all questions that speak to your priorities, or what is most important to your family.
Incorporating these priorities into a spending budget is the first step in maintaining financial solvency as a single income family.
First Layer of Costs
When you create a budget, you must first determine your household income on a monthly or quarterly basis. Then, determine costs that are non-negotiable, like electricity, debt, or rent/mortgage payments.
Avoiding debt or paying it down quickly should be part of this primary process.
Second Layer of Costs
Now that you have an outline, you can begin adding the second layer of costs, which should include things like emergency funds and other investments like a 401k. When considering investing for retirement or making even a mortgage payment, make certain to take your taxes into account. Taking advantage of tax diversification techniques can help make sure your money goes farther.
If, after this process, you cannot get past the second layer without expending your total budget, you may need to reassess the number of non-negotiable costs your household carries. If the mortgage is prohibitive, consider a less-costly location or downsizing altogether.
“Nice-To-Haves”
Finally, you can negotiate the “nice-to-haves,” like dinners out or entertainment.
During this process, reduce stress by incorporating your entire household in the decision-making process. This increases buy-in and reduces the risk of purchasing things off the budget. It also has the added benefit of teaching kids the importance of budgeting themselves when they grow up.
Another tip: make cost-saving fun! Design family challenges to find the best coupons or online deals and reward the winners. This way, cutting costs becomes a more positive than negative experience (i.e. what has been gained rather than lost).
Downsizing as a Lifestyle
Living minimalistic and being content with less has its benefits. Instead of taking your family out to that fancy new restaurant, have a picnic on the beach! Experiences have a longer-term impact on happiness and well-being.
You can even make holidays fun on a stringent budget. Create craft projects that decorate your house and keep everyone engaged.
Living in this manner will encourage you to find new and refreshing outlets on which to spend your energy. Likely, you will spend less time at the mall and more time outdoors. This can be great for your health as well.
You may also notice that your house gets cleaner as clutter disappears. You may find that all the time you used to spend dusting and cleaning can now be spent on more important matters.
Living Well on One Income
Single income families can live rich now and later by following a few smart financial strategies. Creating a budget together can be step one to making your dollar stretch farther and simultaneously reinforcing stronger family bonds.
Above all, don’t be overwhelmed. Simply start small and take one step forward at a time. It will all be worthwhile for you and your family.
Another important money tip for single income families is to have a solid investment strategy to make the most of the income you do have. Expert financial consultation can put your savings to work for you, giving you a stream of passive income or a retirement plan you can trust.
For more information on wealth and business planning, contact us today.