Planned or unexpected, major life changes that result in less income like job loss, illness, or becoming a stay-at-home-parent, bring about many challenges. Not only can they throw you emotionally and even physically for a loop, they also have a big impact on your finances. We’re here to offer tips for handling your finances during this sometimes-inevitable life transition.
Review your household budget. Having an established budget while transitioning from a double- to single-income household is crucial. You need to be acutely aware of how much money is coming in and going out (and to where). This is the perfect time to find every way possible to cut down on extra expenses, like eating out or gym memberships, and truly focus on paying down debts or building up savings.
Consider the extras. If the loss of an income means losing benefits from a former employer, such as health or life insurance, you’ll have to consider the cost of taking on these expenses and add that to your household budget. On the other hand, you can also count on saving money on gas for your vehicle or a workplace wardrobe, for example, since you won’t be traveling to an office every day.
Reevaluate your savings strategy. If your former employer offered retirement savings, it’s in your best interest to figure out alternative ways to contribute to some kind of savings account or investment fund. Even contributing a small amount is better than nothing. And you’ll still want to ensure you have money put away in an emergency fund for unexpected expenses like home repairs or medical emergencies.
Forget about the Joneses. Keeping up with the latest fashion, home décor, and lifestyle trends is expensive! Reducing your household income means making sacrifices, which could include driving older cars, taking cheaper vacations, and searching for free entertainment. If you focus on putting your needs before your wants, you’ll be in much better shape financially.
Supplement your income. If you find that you still can’t make ends meet after cutting every expense possible, consider picking up a side job like tutoring or pet and/or house sitting. You could sell unwanted items at a yard sale or on Ebay, sell crafts on Etsy, or teach online courses. Every bit helps, and it could result in just enough extra funds to make transitioning from a double- to single-income household a little more affordable.
Presented by Member One Federal Credit Union