Many families face the challenge of moving from two incomes to one. A spouse may have been laid off, one spouse has gone back to school or one has left his or her job to be able to stay home with the kids.
Adjusting to living on one paycheck is difficult if you've been accustomed to having two sources of income. When a household is used to spending higher amounts of money, when a money source ceases to exist, adapting is not always the easiest thing to do. Even for those that make a living most people would say is very comfortable. Years ago in an economics class I took my professor said the more income that comes in, the more money tends to be spent because people become accustomed to spending on the level of income they make.
One important step in learning how to live on one income is to accept the fact the family probably won't be able to spend as freely as when there were two incomes. Next is to identify the expenses that are flexible that can be easily adjusted, and then look at other expenses to see if there are some ways to adapt.
Design a Budget – And Stick to It
To become more acclimated to a new financial situation, one of the best steps to take is to create a budget. In your budget list all sources of income and all living expenses, no matter how small. This includes both regular monthly expenses and the best estimate you can come up with for the less frequent expenditures you may be paying for in cash, either routinely or from time to time.
When you create a budget, it helps clearly define how much money is coming in and what the family's current expenses are. If expenses exceed earnings, this is the first step to see where adjustments can be made.
To do this, the first place in your list you want to look is to eliminate any non-essential or luxury expenses. This should hopefully go a long way to bring your budget closer to target. Every time you spend, regardless of the amount, keep the receipt or note the purchase down and keep a good tally; this will also help you see where money goes.
After you've successfully eliminated any non-essentials, then you can look to scale back on other regularly monthly costs. Some bills are pretty inflexible such as rent, mortgage, and other types of fixed payments, but there are other areas such as utilities, food, clothing, and cars/fuel where you find ways to cut back. Once this is done and if the expenses still exceed or equate to earnings, look to other ways to possibly downsize. For instance -
- Can you get a less expensive car or do you live in an area where you can get by on one car because there is adequate public transportation or things are in walking distance?
- Is it possible to downsize to a smaller home or apartment?
- Where else can you cut back? Look to money spent on things such as cable, mobile plans and other entertainment expenses that can be eliminated or reduced.
- Are there possessions you can sell off and use to pay off some debt and/or put that money into savings?
- Can you refinance credit cards or your mortgage? Both have big potential for savings.
Focus on Conservation
If you're more conservative with electrical appliances, water, gas, heat, and air conditioning, this will help you to scale back on your regular expenses. Little things, such as turning off lights when no one is in the room, filling washers and dishwashers to capacity and line-drying your clothing will be small differences, but they will add up. Plus, using less energy is better for the environment anyway.
For clothing and other items you can shop online or in thrift stores. Often you can find great deals purchasing some household goods through the Internet by comparison shopping. Another great way to save on items you need to buy is to watch for sales and always check the clearance or bargain bins first. All of these small changes in your buying habits will make it easier to live on one income.
Look at Grocery Bills
Grocery bills are usually an expenditure that can be flexible to an extent. You can still enjoy terrific meals without cutting back on quality. Look to cut out convenience foods, such as pre-cooked meals and packaged snacks, and focus on making meals from scratch. Aside from bringing down costs, it's a lot healthier to eat self-prepared meals. There are many sneaky ways grocery stores try to get you to spend more, so look to avoid those pitfalls too.
Plan for Savings
Just lost an income source and you are saying to put a focus on savings? Yes. According to experts, building savings is an important aspect, albeit one that is more challenging. If moving to one income is planned, start treating the extra salary as a source of savings. This not only helps create a financial safety net, it also helps you to adjust to living on one income. If the less income is unexpected, try to incorporate a bit of savings into your monthly budget, whatever the amount you can.
Having some savings stashed away is important for two reasons. An emergency may arise which becomes an immediate large expense (i.e. your furnace breaks in the middle of winter) or, in a worst case scenario, the working spouse or household member experiences a job loss due to layoffs or cutbacks. A small nest egg is always a wise thing to plan for, so you have a bit of money in the event there is a temporary scenario of no income coming in at all.
Around the same time I took that economics class I read an interesting article. In 2006 CNN Money published a story titled, "Scraping by on $150,000 a year". The story featured a family where one spouse lost a job and, while the working spouse was making $150K a year, the family still struggled, despite the fact this income is higher than the U.S. average. The family cut back on many of their expenses, but still lived paycheck to paycheck. The original story is no longer online, but a few other websites still have copies of it.  I remember being shocked at the time because most of us don't make that level of income on two salaries. How could they be struggling? But then I thought back to that economics class...
According to a 2010 CNBC piece, Larry Ginsburg, a certified financial planner with Ginsburg Financial Advisors in Oakland, Calif., notes moving to one salary after "building a life on two" involves planning, discipline and "above all else" having the willingness to make the hard choices.
"The first thing you need to do is acknowledge that things are going to be different," Ginsburg told CNBC. “Many people make the mistake of thinking this will only last a short time so they don’t need to make changes and they get deeper and deeper into debt.” 
The initial impact of transitioning from two incomes to one is a large change, and it's not always an easy one to make. If the move to one income was voluntary, it's a little easier from an emotional standpoint than one that is forced by a layoff or firing. There are so many other things that come with losing a job unexpectedly.
The key is to successfully transitioning from two incomes to one is to know your incoming and outgoing money and learn how to manage it well. Once you become accustomed to the one income, scaling back will start to come more naturally and you'll feel less of a pinch.