Today’s Yahoo!Finance column looks at whether couples with children can afford to live on one income. When I sent out queries looking for average couples who are managing on one middle-class income, I got no replies. I worry that it’s a sign that families who are living on one income are struggling, and don’t want to talk to a reporter about it. Or maybe everybody’s busy with end-of-the-school-year stuff and they don’t have time for a reporter.
In any case, I thought I would throw in my experience on this front. My spouse and I have earned two incomes, but mostly lived on one, for 16 years. We earmark the second income for savings and luxuries — vacations, home improvements, kids’ enrichment activities and the like. What’s worked for us?
-Minimizing child-care expenses. Instead of full-time care, when my oldest was born I worked the overnight shift producing a morning television show, so I was home with my daughter between noon and 7pm. Over the next ten years, my spouse and I traded off working from home with part-time help. Eliminating a commute gives you time to take care of basic household chores and to grocery shop quickly (not during peak weekend crowds), so you eat take-out less.
Working without full-time child care sometimes meant working in the middle of the night or weekends to finish a project. I also tried (sometimes unsuccessfully) to push the biggest projects into the school year and cut back in the summer.
It also means making strategic decisions about the kind of jobs you take and how much you work so that your income isn’t eaten up by taxes and childcare.I would argue that if you can work from home on a freelance basis and it doesn’t create enormous stress and turmoil in the household, do it – even if your profit is minimal for a few years. It’s an important investment in the future. Eventually, your kids will be in school full-time, eliminating childcare expenses, and your experience, skills and contacts will translate into more work at a higher wage. It’s also a critical safety net if something happens to your partner.
-Developing a support system. It helped to move out of New York City and into a kid-oriented suburb where we quickly found friends and developed a support network, and had family an hour away.
-Minimizing automobile expenses. I’ve blogged about this before. We own one used car and take the train to work.
-Staying debt-free. We have never carried revolving debt of any kind; our only debt is a 30-year, fixed-rate mortgage. -Always maintaining some kind of emergency fund — whether it’s a few hundred dollars or a few thousand dollars. It keeps you from pulling out a credit card when something goes wrong with the car.
-Saving for retirement aggressively before you have children. I always tell people who are 21 to max out their retirement savings — because if they save for just nine years and stop, they’ll have more money than if they start at age 31 and save for 30 years. Some people tell me this is bad advice because who has money to save in their 20s, and their incomes will be higher later. I would argue, from experience, it’s a lot harder for a family of five to save than it is for single person out of college.
-Keeping it simple. We take full advantage of local parks, the library and school-sponsored sports (can someone please explain the benefits of putting an eight-year-old on a traveling team and spending the weekend in the car?) We own a 15-year-old television. Every time I think about buying a fancy flat-screen, I remind myself that the last thing I want to spend my free time doing is watching T.V.
I would love to hear your ideas for living on a single income.
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May 8th, 2008 at 4:16 pm
My family of four lives on a single income. My income has risen into the 90’s, but when we started a family 19 years ago it was around 40.
1. We life in a rural area where housing costs are much less. We live about 2.5 hours from Nashville and 3 hours from St. Louis (but only 15 minutes from where I work).
2. My wife is the master home economist. She squeezes an incredible amount out of our budget with coupons and comparison shopping. She is thrilled when she comes home with a blouse she bought for 3.00 on sale (of course she’s gorgeous so she looks good in anything).
3. We drive our cars until they literally won’t run anymore.
4. We follow Dave Ramsey’s teachings. We paid off all of our debt (including our house) over five years ago. We have no credit cards, we pay cash for everything. If we can’t pay cash, we don’t buy it. We use the envelope system for our regular purchases (food, clothing, gasolene, etc.)
5. I have one son starting college next fall and another one a year after that. We’ve saved money for that since they were little. We’ve also stressed to them about good grades and working hard in school. My older son is attending a local state school and has won enough scholarships to pay for all of it.
6. We do a lot of entertainment at home. We netflix for movies and we eat out only once a week at most.
My wife is a very intelligent and personable lady and could have gotten a high paying job. She made the choice when we got married that she wanted to be a stay at home mom. Its worked out splendidly and we’ve never regretted this decision even looking back almost 20 years later.
Laura, I enjoy your articles, I look forward to reading them on Yahoo Finance each week.
Dear cfan: Thanks for your comment! Great advice!
June 12th, 2008 at 11:00 am
This is a really bad website, you should get some better tech help as I am sure this is not cheap.
I am blogging hopefully to get a response regarding your Real Estate article on Yahoo 6/12.
Could not be farther from the truth, if you really want to learn about what happened, you shoudl speak to a real practioner, not NAR or any of those other worthless PACS.
Big Banks. Big Builders and Big investment houses are the guilty ones and no one does anything about it.
Hi Brad: Sorry you don’t approve of the site design, I like it myself. I didn’t speak to NAR or a PAC when I wrote the piece. I was just calling it as I see it. I think that everyone does need to take responsibility for himself in all areas of financial life, but as you indicate, big banks and big investment houses really exacerbated the mortgage crisis. And by the way, I have friends who are investment bankers and mortgage brokers who are honest people. But every industry has bad apples (even journalism!)
August 1st, 2008 at 5:14 pm
Yes, it’s possible to live with one income. It’s not as hard as what people think it is… We’re a family of 4 who live in Southern California with annual income of $41,267.20… we’re not a lottery winner and we’re not a freegan either… just an average working family who save regularly and live modestly. Drive used car, use prepaid phone… the car is drivable and the phone works fine. It just a matter of choosing thing wisely… Bring lunch to work, prepare a nice meal rather than buy a 99cents meal at mcdonald.. It cost the same but we got more quality and more quantity. $1 chicken sandwich + $1 fries + $1 soda=$3.00 for 1 person versus $1 box of spagetti + $2 jar of spagetti sauce + water=$3.00 for 4 persons. We purchase everyday’s expense with the credit card and use the reward points to pay for shopping. We’ve a decent amount of emergency fund, college tuitions and retirement account. There’s no magic or gimmick to do all this things… really!