Are you a double income family? If so, it’s time you took full advantage of your income streams and put them to work for you! Check out these 5 tips on how to take full advantage of your situation.
First off, if you’re like the majority of people, you find yourself struggling to pay the bills at the end of the month, even with 2 incomes. You also have no idea how one income families do it because you can’t imagine living off of one salary. Well, let me give you a few tips on how you can take full advantage of your two incomes!
1. Live Off One Income
Yes, you heard me right. It’s possible to live comfortably off of one income and do some major damage to your debts and investments with the other. If you are in a double income family, you have the ability to quickly surpass me and my wealth building because of your position.
I am a single income family with my wife and 3 kids. We live off of my one income and budget extensively. Our budget method doesn’t mean we have no money for fun, but rather we put our money towards things we really value and avoid junk. For those of you that personally know me, you know that I am in middle management and you may feel that I am able to do this solely due to my position and income. The truth is, we have been a single income family for the past 9 years, from the time I was in an entry-level position. It’s not about how much money you make, it’s about how you spend the money you have.
Is One Income Really Possible?
YES! Imagine if you cut your budget to live entirely off one of your incomes. It may be exceptionally tight, but you would have an entire second income to pay off debt or invest. If you could cut enough out of your budget to do this, the sky is the limit for your finances! If I can live off one income – so can you. I invest much of my pre-tax money so my take home checks are less than some of those in entry-level positions at my work. It comes down to budgeting and spending our money on what we really value in life rather than wasting it on junk. For further help on budgeting, please refer to my related article – It’s Time To Budget Like A Boss! I really want to stress to you that living off of one income is possible if you cut back in your excess areas. I understand that child care may take up a huge chunk of your budget, but it’s possible to budget that in also. If it is too tight with childcare, you could always pick up a small side hustle just to pay for that expense and use the other income to destroy your debt!
How To Budget One Income – Realistically
If you sit down and do a budget right now, you will be able to identify some of the areas keeping you from living off of one income. Some of these expenses keeping you from one income may be your vehicles. If you have expensive car payments, get rid of them! Having a new car is nice – but is it $500 or more a month nice? Imagine driving an older car without a car payment. It may be out of your comfort zone, but you will quickly get used to it if you put your money towards things you value. Perhaps you want to live off one income so one of you can stay home with the kids. It’s totally possible if you budget! That alone should be enough motivation to accomplish this goal. Other expenses that may be holding you back from living off of one income are:
- Cable TV
- Boat/Car/Truck Payments
- Smoking Habit
- You Go Out To Eat Way Too Much
- Your Grocery Bill Could Feed A Small Country (How Frys Pickup (formally Click List) Saves Me Money)
- Credit Card Debt (Simple Steps To Start Your Debt Free Life!)
- Whole Life Insurance (How To Pick The Right Life Insurance)
- You Bought A Mansion – Consider downsizing to a smaller home
By removing some or most of these items, you can definitely get on the right path to living off one income.
2. Pay Off Debt
So let’s say you are serious about living intentionally and being wise with your money. If you have a large amount of credit card debt or student loans, imagine how quickly you could pay them off! By living off of one income, you can put that second income entirely towards the debt, and you would have those cards paid off in no time. If it’s a scary student loan, give yourself a couple extra years and you could eliminate it! Debt, of any kind, is inhibiting your ability to building wealth – take it head on!
3. Start Building Wealth – Fast!
With all of your debts paid, it’s time to start building wealth. By staying on budget and starting this right after your last debt is paid off, you should easily be able to put at least 18% of your total income away for retirement. This means putting it away into your employer-sponsored retirement plan and/or a Roth IRA as long as it totals 18% or more. Compound interest will work wonders for you and you will be able to retire comfortably!
4. Save For A House/Pay It Off
Before my wife and I were married, we had double incomes and no kids. We lived off of one income and put all of her income into the bank. In less than a year, with both of our incomes, we were able to put $40k in the bank! Looking back now, I was so ignorant about money, because we should have continued this trend to buy a house in cash. On a positive note, we purchased vehicles with cash, but we should have been investing for a home. After your debts are paid and your retirement is set, start saving up for a home – or pay your current one off! If you are putting several thousand in the bank each month, I would suggest you save up the entire amount and pay for a house in cash, even if it takes 7 years. However, if you are not patient enough for that, at a minimum, save up a substantial down payment of at least 20%. This will eliminate the need for private mortgage insurance. Private mortgage insurance adds a significant amount to your monthly payment to protect the lender, not you. Don’t waste money if you can avoid it!
If you already own your home, get that mortgage paid off asap. Can you imagine living without a mortgage?! It’s extremely possible to do quickly if you have that extra income stream!
5. Build More Wealth – Or Quit!
With no house payment or debt, you should easily be able to invest and live off one income. This opens your family to a myriad of options that can be tailored specifically for you. If you want to build more wealth you can continue to invest more and watch your nest egg grow much more rapidly. Do one of you want to quit your job to pursue a new hobby or career interest? The amount of flexibility you will have in this scenario is endless!
If you are a two income family and are struggling to get by, I strongly encourage you to take a second look at your finances. Get a budget in place to see where all your money is going. There is no reason you can’t cut out much of your unnecessary spending to live off one income. Many families live off of one income – even low-income earners. Again, it’s about prioritizing your spending and telling your money where to go. If you have yet to subscribe, please enter your email address below so you never miss a post! Keep working at it my friends, you work too hard to be this broke! -Ryan