Smart Financial Moves for a Single-Income Family

Changes in child care, added family responsibilities or reduced work flexibility may have you rethinking your family's dual-income status. Shifting from two incomes to one requires financial discipline and a change in your overall mindset. If you've decided to become a single-income family, the key is to plan ahead and slowly adjust your lifestyle, spending and savings goals.

Budget tips for one-income families

Rather than focusing on a loss of income, weigh cost savings into your decision on whether or not to become a single-income family. You can rework your household budget and make financial moves that help ease the transition from two salaries to one.

• Calculate savings from reduced work expenses: Expenses such as child care, work clothes and the cost of commuting to the office can be removed from your budget and counted as savings.
• Review your tax status: As your household income decreases, you may fall into a lower tax bracket, which will give you a larger take-home amount on your single income.
• Time large purchases: If you've recently purchased a new home or a car, you may no longer need to save for those items and can remove them from your budget while you're getting by on one salary. Don't forget that you'll still need an emergency fund available for appliance breakdowns, car repairs or other unforeseen expenses.
• Adjust everyday expenses: To ease the transition to a one-income family, look for ways to lower household expenses by establishing spending habits that match your new lifestyle. For example, you may have more time to cook at home, so you could decrease spending on restaurant takeout.

In the end, you may find that the changes in your budget are more manageable than you initially expected, and the benefits you gain may be worth the cost to you and your family.

Adjusting your savings strategy

Single-income families still need to keep up with savings goals. Whichever partner is working can still contribute fully to their 401(k) plan to maximize tax benefits and potential employee match. Try to maintain your additional savings goals, even if it means diverting money straight from your paycheck to a savings account before you have a chance to spend it.

If you have young children, it's never too early to open a 529 college savings plan. Small amounts will compound over the years and assist with future college expenses.

Why a single-income lifestyle could make sense

When deciding whether to have one or two incomes for your family, lifestyle changes are an important factor. You'll reap some nonfinancial benefits that may be well worth the temporary decrease in household income.

• Less daily stress: Rather than squeezing in personal duties outside of work hours, work-life balance may be improved for everyone if one of you has a more flexible schedule and can take over a greater share of household responsibilities.
• Simplification: When both partners aren't rushing out of the house each morning and working late to meet deadlines, your family's lifestyle can be simplified. You'll be able to spend more time together, and you may find it easier to plan activities you enjoy outside of work.
• Time to pursue personal interests: Along with your single-income family status, you may gain the opportunity to pursue other interests. Perhaps now is the time to participate in activities you enjoy at a slower pace. Breaking away from a 9-to-5 job gives you an opportunity to volunteer, develop a skill or start a side gig.

Stepping out of the workforce doesn't necessarily mean you're making a permanent decision to rely on a single income stream. According to a Bureau of Labor Statistics survey, 33% of households surveyed with kids under six years old were single-income families, but the percentage dropped to 19.6% for households with kids 12 years and older.

At some point in the future, it may make sense for you to become a dual-income family again—but right now, focus on what's best for you and your family. The first step is to weigh the financial gains of having two incomes against other lifestyle factors that are important to you. This will help you make the right decision for your career, retirement and other financial goals.