How To Transition To A Single Income Family

Making the Switch to Become a One Income Family

With the cost of living rising, some may wonder, why choose to become a single-income family?

Several make a lot of sense and can benefit your family in the long run, depending on your situation.

One possibility is when a family decides one parent will stay at home to care for the kids.

Another cause to switch is when someone is considering a career switch, and they need to get a certification or finish a degree.

Perhaps the drop to one income is because they are laying the groundwork for launching a business.

While these are reasonable and valid options, the transition isn't always easy.

I want to share some tips I picked up on a conversation with Joe Mecca about how they recently made the switch to become a single-income family.

There are some great takeaways that can apply to different situations.

Define Your Goal and Timeline

The first step is making sure you are clear on what you hope to accomplish with the switch and when you want to make it. The better you can define these, the easier you can plan for this transition with income.

For example, let's say it is relatively short-term. Someone decides that they want to go back to school, and it will take a year to get the certification or wrap up the degree.

The family may decide to start aggressively building up their financial cushion first and reduce some expenses.

If this is for several years, however, they may work incrementally with their budget. After that, the family may start dialing back on expenses to live on the reduced income. They'll want to find a realistic budget that they can sustainably follow.

As you're planning this out, ensure that you shore up your savings before making this leap.

Do a Test Run of Your New Budget

Many families I spoke to who made this transition said doing a practice or test run was helpful because it gave them a clear idea of whether that budget they drafted on the spreadsheet or paper can hold up in real life. It also built up their confidence with this new routine and budget.

While doing a test run, it would be wise to use that second income you have right now to build up your buffer or pay off some debts. 

Reduce or Eliminate Unnecessary Debts

Debt, especially high interest, can be stressful to anyone, but it's even more of a burden when relying on one income. Another financially savvy move is to pay down or pay off those unnecessary debts before the switch.

Use that second income to fund your debt snowball or avalanche. It’ll give you some buffer in your budget when income is lower.

Get a Financial Review and Plan

The good news is as a Coastal member; you have several fantastic resources available to you.

If you're dealing with high-interest debts, you may be able to consolidate and reduce your interest with a personal loan. There are also free educational workshops available to optimize your finances.

Finally, you can speak with someone from the Wealth Management team, available through CFS*, who can review your finances and assist you in creating a plan that fits your goals and needs.

Connect with an Advisor