Could you and your partner supercharge your ability to meet your financial goals by living on one paycheck? It’s a common piece of financial advice, but is it possible? And how do you go about achieving it? Let’s take a look.
The advantages available to couples who are able to live on one income and bank the other paycheck are huge. Imagine being able to save an entire paycheck each month, towards whatever your financial goals are. Here are some ideas of what you could achieve:
- you could pay off debt fast;
- save a down payment or deposit on a property quick smart;
- boost your retirement savings and reduce the number of years you both need to work;
- amass enough savings to start a business venture or fund a career change;
- save for a big wedding or
- save to start a family.
On the topic of saving to start a family, not only does living on one income boost your savings to comfortably have a baby, but it’s also good practice for living on one income when the baby arrives and one of you is taking maternity or paternity leave to look after it.
Let’s look at working out how you and your partner can set this in motion and take advantage of the benefits.
Firstly, this is going to be way easier if you combine your finances and your paychecks both go into one account. This gives you both transparency over what’s happening with the two incomes and just makes it all easier to organise on a practical level.
Sit down with your partner and discuss the idea, taking a look at both your incomes and your expenses. Work out how much money you’d have left over after all mandatory expenses if you were to live on the lower of the two wages, or on the higher of the two wages. Are you able to create a budget that you’re both comfortable with on the lower of the two wages? Or will you be going with the higher? There’s no right or wrong answer here, obviously living on the lower wage will allow you to save more, but if it’s too ambitious it may make it difficult to stick to the plan of living on only that.
Living on one income may require lifestyle changes to make it possible. You may need to downsize your home, become a one car family or cut down on entertainment and travel expenses. Consider the options available to the two of you to cut down on your overheads to make living on one income possible.
It’s important to create a budget based on which income you decide that you’ll be living on. Discuss with your partner how much the two of you think you can live on in terms of each budget item and come to an agreement.
It’s also very important to agree on what you’ll be doing with the paycheck that you’re not living on! If it’s being put into savings, is the account in both names? What saving goal are you putting it away for? When is it acceptable to touch the money being put into savings? If it’s paying off debt, who’s debt, and what portion of it is going to pay of debt? Maybe a percentage of the money is going to one goal and a percentage of it is going to another. It’s a good idea to discuss this up front before you start living on one paycheck, to ensure you’re both on the same page.
Have you tried living on one income as part of a dual income couple? How did it go? Share your tips in the comments below.
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