Posted in Family, Finances

The Smart Way To Transition To One Income -Part 3

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Final Thoughts and Tips

Congratulations! We have finally made it to the last post in this series. I hope that you have found this series enlightening and useful. Previously, we discussed money management and specific types of budgeting techniques.

Knowing where your money is going and figuring out the best way to spend it are all important steps to smoothly transition to one income.

Hopefully, at this point you and your spouse have looked at your expenses and created a working budget around your existing income. Here are my final 5 tips on transitioning to one income.

1.Revamp Your Budget

In my previous post I suggested that you make a dual income budget to help manage your current finances. Now, it’s time to create a budget based on which ever spouse is going to be working. This is where the goals based budgeting method can come in handy. Using this method your expenses are tracked based on your financial goals.

In this case that goal is living on one income. If you have not set a date for when you will officially start living on one income now is the time to do that. Set a target date and keep that in mind when you are creating your budget. For instance, I knew I wasn’t returning to work once the school year ended in June. So our target date was July 1st.

2.Start Early

No matter what your target date is I strongly suggest that you begin living on one income ASAP! Once you have created your new budget begin putting it into action. It is much easier to make the switch if you have already been doing it.

My husband and I began living off of his income in April. Originally, I was responsible for paying the cost for childcare, mortgage, and car insurance. Gradually, we began paying all of those bills from his paycheck except for our childcare costs.

Even on a dual income our childcare bills were enormous. Both boys were in private school at the time and the baby was going to a sitter. So I had to continue to pay those bills from my check. However, when July came we were in a much better position financially and mentally.

(I will admit that this part takes a lot of discipline to stick to your budget. It’s tempting to overspend because technically your spouse is still making money. Just pretend like it’s not there.)

3. Pay Off Debt & Save Money

If you think your going to have trouble keeping your hands off of your spouse’s income, then put it to work. Use part of their income as savings and use the rest to pay off or pay down any lingering debts you have. The less you owe to the creditors the better off you will be.

4. Negotiate Your Bills

Ok, so you’ve created your budget and you’ve slashed the non-essentials, but it still looks like it’s going to be a struggle to make this one income life a reality it’s time to make some calls. If you have been a loyal customer to your internet, cable or cell phone provider you may be able to get a discount.

These companies don’t want to lose your business and are often willing to offer you promotional deals in order to keep you with them. Unfortunately, you’ll have to get on the phone and call them which can be a real pain. Or you can sign up for a service called Trim, that will do the negotiating for you.

5. Try Paying Your Bills Weekly

Most of us pay our bills in full on the due date. Which, works really well if you and your spouse get paid on alternating weeks,don’t have a lot of expenses or if you’re not living paycheck to paycheck.

Even with both of us working we were pretty much living that paycheck to paycheck life. Then I found a blog post by Jamie on The Simple Living Mommy about paying your bills weekly. It really changed how my husband and I pay our bills and has made living on one income a lot easier.

I can honestly say that following this plan and using these tips has made life living on one income a lot easier for us. When I was working I didn’t get paid in the summer and we often found ourselves trying to dig out of a financial hole by the time I got paid again in September. However, this year we haven’t missed any payments and we haven’t struggled one bit.

We have been truly fortunate and blessed to be able to make this dream a reality. I hope these tips will help further you on your way to being able to live on one income.

If you have any other tips or advice please feel free to leave a comment.

Until Next Time,

The Crafty Afro

Posted in Finances

The Smart Way to Transition to One Income-Part 2

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The money talk. (cue ominous music) Other than deciding who’s going to have the talk with the kids about sex. Talking about money and finances is another difficult conversation for most couples to have. How many of us honestly sat down and talked with our significant other about finances before we got hitched?

You know those really difficult questions like: How much debt do you have? How much money do you have saved? How do you handle your finances? What’s your credit score?

But you know that whole love thing kinda gets in the way of talking about these kinds of things. I will admit after 3 years of marriage we still hadn’t had the money talk. It wasn’t until we tried to buy our first home that it was even something we seriously discussed.

So if this is the first time you and your honey have looked at your finances together don’t feel bad. Chances are you’re not the only couple in the world that hasn’t.

When I decided I wanted to stay home with the kids my husband and I had to take another hard look at our finances. But before that, I had to make sure that this was something he was on board with. We had been a dual income family for our entire marriage.

I was asking him to bare all of the financial burdens on his shoulders and it wasn’t going to work if he wasn’t on board with my decision. Once I knew he was on board we began to formulate a plan on how to make living on one income a reality.

If we could make it work for our family. I’m sure you can make it work for yours.

Where Did It All Go?

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In my previous post, I talked about following the money trail. Where is all of your money going? How is it being spent? Hopefully, you’ve had a chance to check out some of the apps and were able to track at least 1-2 months worth of spending.

I will be honest. When my husband and I did this step I didn’t break everything down line by line. I just broke everything down by categories to see where we were spending most of our money. We had separate bank accounts at the time so I had to combine our information together to create one whole picture. (This was before I discovered Honeydue and Mint.)

We had the usual big-ticket items: mortgage, car payments, childcare, and food. We also spent a large amount of money on non-essential items. My husband has a subscription to Amazon prime and likes to find “deals”. Not to mention he has a couple of expensive hobbies like photography and detailing cars. Needless to say, we had to some areas that we could cut back on.

But I shared all that to say that at this point you don’t need to analyze where every penny went unless you really want too. Just knowing what your big-ticket categories are can be really helpful. But you know what can be even more helpful?

The B Word

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Budgeting…I have a very intense love/hate relationship with budgeting. It’s something that I know I need to do, but I just really don’t want to do it. However, when there is only one person supporting the family financially not wanting to create and stick to a budget is not a wise choice.

If your family does not have a budget in place the first thing you will need to do is to create one. This is the part where you’ll take a more in-depth look at your families spending habits.

Budgeting Methods

The truth of the matter is that about two-thirds of adults do not budget. So if you don’t currently have a budget in place you are not alone. Budgeting gets a bad rap because we don’t like for anyone to tell us how or when to spend our money. It’s seen as being restrictive and the killer of all things fun in life.

That’s simply not true. Budgeting can be very beneficial especially when you have limited funds. It helps you keep unnecessary spending in check, pay off debt, and it can even help save money. Here are 4 of the most common budgeting methods.

1.The Envelope Method

If you’re like me and don’t like to watch money slip through your fingers, then the envelope budgeting system may work perfectly for you. It’s fairly simple to set up. You create envelopes for each category: clothes, food, transportation, etc. Then based on last month’s expense you place a set amount of cash in each envelope. You only spend what’s in each envelope and you don’t borrow from the other envelopes. Once the money is gone that’s it. Or you could try the cashless envelope system.

2.The 50/30/20 Method

This method was developed by the bankruptcy expert Elizabeth Warren. For this method your break your come down passed on the following percentages: 50% of your income is dedicated to your needs (housing, food, utilities, etc), 30% goes to your wants (dining, cable services, new clothing, etc), and 20% goes to your savings or debt reduction efforts. The 50/30/20 method works well for people who are on a steady income or for people who work on salary. If you are interested in using this method check out this 50/30/20 budgeting worksheet.

3. The Zero-Based Budget

The zero-based budgeting system requires you to create a budget at the beginning of every month. Then you need to write down everything that you expect to spend for the month( essentials and nonessentials).

After you’ve written down everything you will subtract all of your expenses including debts and savings until you’ve reached zero. You can read Dave Ramsey’s guide on how to make a zero-based budget here.

4. The Goals Driven Budget

If you are reading this blog post, then I assume that your goal is for you and your family to comfortably live on one income. This is where goals based budgeting can come in handy. You create a goal and track your expenses based on your goal.

If your goal is to save $1,000, then you look at your income and expenses to see where you can eliminate or reduce spending every month to achieve your goal. The money that you would normally spend on going to Starbucks every day would be put in a separate savings account dedicated to that goal.

Final Thoughts

Obviously, these aren’t the only methods that can be used to budget your money. You could choose to use only one of these methods or a combination of two of them. Or you can find a completely different method. It really is all about figuring out which type of budgeting method works for you and your family.

To help you on your budgeting journey there are also plenty of free budget tracking worksheets online or you can create a budget using any of these apps.

The whole purpose of creating this budget is to get a handle on your current financial situation. Once you get a handle on your finances with a dual income you can start looking at how your finances will work on one income.

I am by no means a financial expert. If I have missed something or you have some more helpful tips please feel free to leave a comment.

Thanks for stopping by and stay tuned for my final and most important tip on transitioning to one income!

Until Next Time,

The Crafty Afro

Posted in Finances

The Smart Way to Transition to One Income

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Roughly 75 years ago it was normal for a family to live on one income. Mom stayed at home and took care of the kids and dad went off to work. Sounds so simple right? Well, I wasn’t part of that generation.

I grew up in a dual income household. There were only a few times in my life that I could ever remember us living on one income and it wasn’t intentional. And they weren’t exactly the best of times.

So when I decided 6 months ago that I was going to become a stay at home mom I didn’t have any real life experience to draw from. Good thing we have the internet. Granted the good people on the web would have you believe that you can magically become a single income household and pay off $10,000 all at the same time.

But wait aren’t you getting paid when I click on one of these lovely blue affiliate links or ads? So are you really living on a single income? Or what about this side hustle business that is so prevalent in our modern gig economy?

So maybe they should be telling us how to live on a reduced household income and not a single household income…single income sounds better…but I digress (FYI I just started blogging so I’m not getting paid for anything you click on around here. I just like to share information).

It is possible for a dual income household to become a single income household. It just takes a little effort and planning on you and your spouses part. I am going to share with you three things my husband and I did to ease our transition to living on one income.

Follow the Money Trail

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Where does it all go? That’s the question I often found myself wondering every year we filed our taxes. Our annual income was roughly $91,000 before I decided to leave my job. Now our family of six would be forced to live on an annual income of $50,000.

It wasn’t until I sat down and tried to figure out where it was all going that I realized how much money we spent on the essentials and how much we wasted on unnecessary things. For example, we spent $1500 in childcare each month (all of our kids are under the age of 8) and is easily one of the biggest expenses for any family with kids.  

In any case, you will want to track your expenses for at least 1-2 months.

Continue reading “The Smart Way to Transition to One Income”