As many of our regular readers know, Mr. CMF and I adopted a sweet baby girl in summer 2014. This little miss has completely changed our lives since she was born, but, to be perfectly honest, she changed our lives quite a bit even before she was born as well.
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Mr. CMF and I have known for many years that we would like to have the option of having a stay-at-home parent when we had children. We think there are a lot of advantages and benefits of this, and so this became one of our financial goals when we first started talking about having kids- we at least wanted to have the option of being able to have a stay-at-home parent. And when we took a look at our finances, we knew that we would need to make some changes if we wanted to have that option.
So- how to do it? When we first started discussing this, I’ll admit we were a little scared about the possibility of only having one income rolling in every month.
How We Prepared For a Single Income
We decided to tackle this fear head-on! We did this in a variety of ways:
- We started pretending that we only had one income. We arranged it so that all of my paychecks were directly deposited straight into our savings account (since I was the one who was thinking of being a stay-at-home parent, and also because my income was quite a bit less than Mr. CMF’s at that point).
- Our monthly expenses could not go above what Mr. CMF would be bringing home in his paycheck- so we had to make cuts. We couponed. We sold things on eBay and Craigslist. Rather than replacing our crappy cars, we kept them and made do. We became a lot more frugal. If you need help in this area, check out Trim to help you analyze your bills and reduce your rates.
- We got off the credit card spending wagon! Prior to this, we had been the type to carry a balance sometimes. We foolishly considered the interest we were paying to be “not that much,” so we hadn’t been necessarily making a great effort to pay off the cards every month. But when we got serious about planning for a stay-at-home parent, we stopped that crap!
- We used Mr. CMF’s earnings alone to pay all of our bills. And, to keep it “real,” as we would want to do when we did finally have a stay-at-home parent, we also continued contributing to retirement accounts and put a small amount of Mr. CMF’s paycheck into savings every month as well.
- We stopped accumulating new debt. Once we paid off the credit cards that we had (small) balances on, we took a good hard look at the rest of our debt too. We paid off the smaller student loan that we had. The only debts that we did not annihilate at that point were our two federal student loans- since those were larger and were locked at 2.5% and 3.5%, respectively.
- We started up some side hustles. Just in case! We wanted to have some other potential income streams out there, since dropping my income would increase our risk if something were to happen to Mr. CMF or his job. I started this blog and did freelance copyediting and writing, and Mr. CMF started doing some freelancing as well.
The advantage of doing these things was huge. Not only did we start to accumulate a nice amount in our savings account, but this forced us to keep our cost of living in check. Also, the longer we went along happily living on only one paycheck, the more confident that we felt that we’d be able to do it when we became parents!
For us, once we finally got our financial act together and started saving, using free online resource Personal Capital (review here) really helped us to see where our money was going and establish a better budget, as well as better plan our retirement savings strategy. We didn’t find this great free resource until our 30s- wish we’d found it sooner!
And then it started to become apparent that we were not going to be able to have children as easily as we’d hoped. What had seemed like a “just around the corner” type thing started to seem like a dream that was further and further away.
Although we had completely not intended it when we started putting all of my paychecks into our savings account, suddenly that account became much more than our preparation for Single Income Land- it also became a means to get to that place called Parenthood.
In total, we put all of my paychecks for nearly five years into our savings account. In addition to funding fertility treatments and later our adoption, we also pulled from that account to fund the down payments for both our current home and our rental property.
Don’t worry, I’m not suggesting that any of you considering making the switch to one income need to do this for five years before you take the leap! I never would have dreamed that we would have a five year “financial rehearsal” for parenthood. However, in our case it ended up being a blessing in disguise, since we needed that extra cash on our expensive road to parenthood.
What to Do
However, if you are considering dropping to a single income, I would recommend that you do as we did and “pretend” to have only one income for several months- or maybe even a year- before you actually do it. Since some expenses change throughout the year (or only occur intermittently, such as insurance premiums), it was nice to be able to experience all of the financial “seasons” before we took the leap to Single Income Land. Plus, you’ll appreciate having that extra cash in the bank (especially if you are a new parent!)
Also, having that “financial rehearsal” for at least several months is a great way to get an idea of whether you might need to tweak your budget or make further cuts to live on one income. It is definitely in your best interest to figure this one out before you actually drop an income- failure to do this could lead you straight into debt if you are not prepared!
Has anyone else out there considered or already made the change to a single income? If so, please let us know how you are preparing or have prepared in the comments!
Suggested Reading: One of my favorite books on single income living is Miserly Moms: Living on One Income in a Two-Income Economy. This book really hits the nail on the head; the author herself transitioned to a single income while living in arguably one of the most expensive cities in the US- that is, San Francisco. If she can do it, anyone can!
CMF’s favorite FREE money management tools!
Some of the best online tools out there for money management are at Personal Capital, and the awesome news is that they are all FREE! Cash flow tracker, 401(k) fee analyzer, investment checkup, net worth monitoring, and many more! I’m a net worth junkie, so the net worth monitor is my favorite. Check out my Personal Capital review here, or click here to check out all the awesome tools for yourself!