Welcoming a new baby is such an exciting and wonderful time, but so often there is also the financial uncertainty of going from two incomes to one. Living on one income not two can leave you wondering how you’ll make ends meet.
Sometimes this period is short lived, but this doesn’t make it any less daunting – our financial commitments roll on without reprieve.
In my case, my husband and I had discussed and agreed that I would take 12 months initial maternity leave, should we be able to afford it. With a new baby on the way, I found myself asking things like how will we manage and what will we do? We live in an expensive area – can we afford to stay? What other lifestyle changes are necessary in order to afford this change?
When your previous lifestyle had been comfortably supported by two incomes, it’s only natural to wonder how things are able to continue once one of those incomes stops.
But there are numerous ways to reassess your expenses and lifestyle to decide whether you are able to stay home and for how long which will take the anxiety out of managing your finances during this period.
It can be done – you just need a plan. Here’s how I did it.
Firstly, I looked at our budget to see what our monthly expenses were. If we were to drop to one income, could we continue to service these expenses without going backwards (i.e. dipping into savings)?
If the answer is yes, terrific! No further action required.
If the answer is no (the more likely outcome for most) then figure out what your bills would need to be in order to survive on a single income. This will likely mean cutting down.
How tightly you need to reign things in will depend entirely on your individual circumstances, and for how long you intend to be off work. Those taking a 3 month hiatus from the workforce may not need to make the more radical changes those trying for an 18 month break will need to make for example. You need to be the judge.
This list is designed to help you see the areas that it is possible to create further savings when you are living on one income.
Here’s an financial action plan for cutting back:
- Cut out all the non-essentials. No more trips to have nails and hair done (for now)
- Put all new clothes shopping on hold indefinitely unless it’s a birthday or special occasion.
- Delay your overseas holidays – opt for mini break closer to home.
- Go through all your utilities accounts and insurances and compare the market for better rates / available discounts.
- Cancel any unnecessary services like home phone line, Netflix, Foxtel / Austar
- Cancel gym membership – as a new mum you’re unlikely to use this in the early stages. Utilize the outdoors and then reassess the need a little later on.
- Eat out less and start taking homemade lunches to work
- Cut out take away – make meals from scratch. Start meal planning to save time and money on unused and wasted groceries.
- Purchase second-hand clothes, toys and furniture for the baby. You would be amazed at the high-quality items you can find online and through Facebook almost new at a fraction of the cost.
- Ask family & friends if they have any second hand baby gear you can have. We saved a ton of money this way.
- Look at refinancing your mortgage to reduce the interest cost or consider renting elsewhere at a lower cost in a different area if you can without compromising on space
- Make a conscious effort to pay off your credit debt before baby arrives whilst you are still two incomes. With any residual balance – you could consider a balance transfer with an interest free period and set up an affordable repayment plan to erase the balance from your single income
- Save as much as you can prior to baby’s arrival so you have an emergency fund for unforeseen expenses
- Delay home renovation projects and vehicle upgrades. Unless either of these things are necessary to accommodate the baby, they are probably unnecessary ad may contribute to your financial stress over this period of only one income.
- Buy small, birthday and Christmas presents
- Keep outings away from the shopping centre as much as possible. It is very easy to see and buy something you ‘need’ when could have gone on happily without it at all. These purchases add up extremely quickly. Try and limit these trips to once a week and opt for the park, playgroup, beach, walk to the local coffee shop, local farmers markets etc.
This is not an exhaustive list and there will be things in your own circumstances that you know already will make a difference to your financial circumstances by cutting them out / down.
Better financial position in the long term
The silver lining in all of this is that some of the lifestyle changes you make whilst living on one income can carry over once your second income returns – leaving you in a better financial position in the long term.
Perhaps you cancelled that gym membership and meanwhile have found other ways to exercise that you enjoy without the cost. Perhaps you started shopping at farmers markets which saves you money off your weekly grocery bills. You may have cancelled your Foxtel subscription and found you never missed it or you simply watch and pay for only the shows you want, when you want through iTunes. You may have decided that some things are perfectly OK to buy second hand (like toys, children’s books, household items) and that you’ll never pay full price for these things again where possible.
So if you are already struggling to make ends meet living on one income or are wondering how it will be possible when the time comes – use these tips and remember that it is not permanent (unless you want it to be) and even then it is possible.
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Very interesting topic, appreciate it for putting up.