How to Live Comfortably and Worry Free on One Income

If you polled the average household, regarding income specifically where and who it comes from, chances are you’ll see a pretty common response.

“Everyone.”

That would suggest that income isn’t just a one-person show, and instead comes from a variety of streams, namely having some duality as far as who makes the money in the household. Chances are pretty good that one income or one person working to suffice the needs and wants of the home are pretty slim.

Maybe even none.

Studies vary but for the most part more than half of the households in the United States have both people (whether that’s a couple or family as parents) working. More than 60 percent of each household polled had two individuals working to provide, while 90 percent of families had at least one parent working to the tune of 97 percent of married couples with kids.^[1]

While some look at this as the status quo and business as usual, others frown upon it simply due to the nature of how a household can’t survive on one income, mostly predicated on choices that are made, as far as what you’re buying, spending money on and valuing wants over basic needs.

In 1965, for example, 47 percent of households had two adults working, compared to the aforementioned statistics; this survey has the two-income household at nearly 70 percent (66 to be exact).^[2]

The rise in the workforce based on household can be looked at from a conservative and prudent standpoint as inflation and things just cost more than they need to in 2018 versus 1965. While that makes sense to a point, you can’t argue the propensity of the average consumer to spend more than they make, consciously live paycheck to paycheck and go deeper and further into debt, even with the two-income family working 40 plus hours per week, times two.

Half is where most of us are as far as living paycheck to paycheck, with 49 percent being the total number of Americans in that boat; 61 percent in this same study said they don’t have enough money saved to cover expenses for a total of six months, should they need a reserve cash amount to tap into on a moment’s notice.^[3]

You also can look at the rise in credit card debt as proof that a two-income family really isn’t a full-proof way to not only save money but avoid debt, too. If the majority of households are functioning with two incomes, why is no one able to save money? Why are the masses amassing more credit card debt?

In 2014, the average household had $6,300 of credit card debt and as of 2017 that number is up to more than $7,000 ($7,136).^[4]

When you dissect and talk income specifically, you can toss out numbers as far as where you should be financially, and one survey did.

A recent study put out by the Nature Human Behavior outfit said that $95,000 per household is ideal, while $60,000 to $75,000 is emotionally solid.^[5]

That range of $65,000 to $95,000 is enough to be “happy” with your income, with $75,000 being the “peak” per this study.

Now, when you look at the above findings, a few points come to mind.

Most households have two incomes.

Debt is on the rise.

We can’t afford our lifestyle, no matter how many paychecks we have and are living from one to the next.

And making $75,000 is ideal for financial happiness, but obviously that isn’t enough, right?

The case can be made that a one-income family is outlandish, silly, inane and certainly impossible, but those who are making that situation work do so with kids, without kids and have all the same expenses that two-income families have, minus the financial headache and debt, not to mention a free parent or guardian at home.

How is that possible?

The possibility rests on decision making, living within or below your means and ideally determining wants versus needs, how to differentiate and then ultimately let what you make dictate how you live.

Here’s how you can live comfortably on one income, no questions asked:

Take a Budget Dip: Live off your one income, minus 20 percent

No matter if you’re talking one income or two, how much of your monthly income should be put toward saving money?

The answer is a hard and fast 20 percent.^[6]

So the question you need to ask yourself if you’re working with one income is how do a build my budget without feeling defeated and disheartened by a lack of funds, especially with that 20 percent hanging over your head?

The key is building your budget backwards: take what you make every month and subtract the 20 percent right away, and then start from that point forward. Far too often, households look at one income and try to max it out entirely. If you make $60,000 per year, they want to spend that much, and that’s not going to do you any favors from a savings standpoint.

Your budget needs to set ground rules with one income, perhaps even more than others. That’s why the 50/30/20 rule of budgeting is a perfect fit for most one income families.

The simplicity of it appeals to one income, with 50 percent toward needs, 30 percent toward wants and another 20 percent (there’s that number again) toward saving money.^[7]

That 20 percent also can be put toward paying off debt, too, if that’s your primarily focus. Some have split the difference and 10 percent saved and 10 percent toward paying down your debt.

The one income family can work but your budgeting has to be spot on and built around the foundation that saving comes before all else.

And as long as you’re talking budget, avoid temptations to keep up with what others have. If a dual income family is making double what you have, and they’re lavishly doing things up with multiple brand new vehicles, packages from Amazon on the doorstep daily or a shopping spree for clothing for every season, that might not be as an ideal situation to get involved in, mostly due to income limitations but the general rule of thumb that keeping up with the “Jones’ “ is a bad money habit no matter how much you might be making per household.

Cash Business: Shop with cash only, and you won’t be spending too much

In a day and age (no, not trying to sound too old fashioned) when you can insert a chip, scan an app or your phone to pay for something or simply whip out and slide a credit card, order online in a flash or anything else that melds spending and technology together, you can easily see without much fanfare how you could overspend without much effort.

If you’re a family and household with one income, a spending spree is not in the cards, nor is overspending on a consistent basis.

At one point, cash was king, but that isn’t so much the case now.

It’s more about plastic and convenience, versus carrying cash and ultimately saving money on not spending too much on one given purchase.

Latest trends have shown that 44 percent of the population uses debit cards, 33 percent credit cards and just 12 percent interested in using cash for purchases, a huge disparity.^[8]

Another study suggested that 50 percent of people polled carry cash less than half the time they’re out shopping, and when they do 76 percent of that same group has $50 or less.^[9]

That might sound like not having enough cash on you, but let’s take a better look at this from a spending and one income perspective.

Leave the debit cards at home, same goes for the credit cards, and just use the cash you have on hand for purchases, setting limits on the money, too. Once the $20 or $50 is gone, then you’re done spending.

This is particularly useful for things like grocery shopping. You make a list, determine what you need and what everything will cost for essentials, for example, and then take that much cash with you.

A grocery order that is $88 means you bring $90 in cash, not tote around a debit or credit card, end up spending double that because, again, the swipe is all powerful but also a proven budget buster.

If you’re budgeting one income, the cash is king method works, for more than just groceries, too.

That would include eating out for lunch every day, buying coffee or bottled water or any other daily expense that surely is going to add up.

The other statistic from that same study regarding the 76 percent having $50 or less is 46 percent say they use cash less than eight days during the month, and that would be a leading indicator as to why we’re spending too much.

Cash only business eliminates the temptation to simply pay on a card.

If you’re someone that has more than one income in a household and are doing well with that arrangement, this isn’t a call to action to stop what you’re doing and immediately toss aside a second, third or fourth income.

This is more about deciding how much income really is enough relative to being able to budget and determine properly how to spend and save, finding that balance without depravation being your driver.

One of the more definitive ways to look at income and two versus one debate is median household income for families that have both parents working is $102,400 versus $84,000 for the homes where just the male figure works full-time and female part time, and $55,00 for full-time male and female not working at all.^[10]

The numbers suggest one glaring fact that can’t be overlooked:

The more you make the more you spend or, at the very least, feel you can spend based on having the money readily available.

Think of it like this, if you’re approved for a home loan for $250,000, who says you have to use it all? Smart home buyers are quick to spend well below their “approval” amount.

Same goes for the one income: it teaches you how to work with less and gain more, since you aren’t tempted to reason with yourself in the wrong direction and just spend because “you have it.”

The second salary can, in fact, be a bad thing that causes you to overspend or rely on that extra income as a crutch to not pay attention to financial stability.

Again, if the second income exists, do yourself a favor and live off one anyway.

If nothing else, you’ll learn how to conserve, save and, in the event something happens to one income, you’re not overextended budget wise to the point that full-blown panic sets in quickly.