How To Live On One Income – A Budget For A One Income Family

Posted December 12th, 2011 in Budgeting by Jeremy Waller

Can you live on one income? It may not seem like if you have always had a two income household. But its totally doable.

A year ago, I might have felt differently, but this year we’ve moved to one income in our household. With the birth of our twin boys we made the decision that my wife would stay home to take care of them. It has been totally worth it for her to be able to say home, but the reality is it has had a significant impact on our finances.

How to Live On One Income – The Assumptions

The median annual household income in 2010 was $49,445. (2010 is the most recent data available.) Now remember, that’s total household income – not the average per individual. The actual average income for the average American is around $32,000 per year.

For the sake of discussion, let’s assume that you are right around the median. How do you live on $32k per year when you’re used to living on $50k?

Can You Survive on One Income?

Let’s forget about luxuries for the moment. To be frank, if you have to live on $32k per year – you can’t afford many luxuries.

Survival has to be addressed first.

Can you provide shelter, food and clothes for your family on that income level? Yes you can! Will it be easy? Nope.

Doing The Math: Sample Budget

$32k per year breaks down to $2,667 per month. If you apply my recommended budget percentages to that figure you’ll come up with the following:

  • Tithe – $267
  • Savings – $267
  • Housing – $933
  • Auto – $347
  • Food – $320
  • Healthcare – $267
  • Entertainment – $187
  • Miscellaneous – $80

With an income this low, we’re going to have to make some modifications to these numbers.

First, savings is out. Survival comes before savings. Put together a small emergency fund in a secure online savings account and then cut the savings. You can come back once your income level rises. (Update: See the note on housing below.)

Housing is okay. Depending on where you live, that may not get you much. But you should be able to find something in the $700 range and still have enough left over for utilities. You might also qualify for Section 8 assistance. If that is the case, then I highly recommend putting the difference in savings.

The amount budgeted for auto probably can’t come down much assuming you need a car to get to work. Gas, insurance and maintenance will eat up $350 per month. Also, when you’re living on $32k per year you should be driving a beater. You can’t afford a car payment.

Some of the savings pulled from other categories will likely need to go towards food. The average cost of food per month for a family of 4 is around $500/month. However, you would likely quality for food stamps. If that’s the case, then the budget above could probably be reduced.

Now healthcare – hopefully your employer pays a portion of your health insurance costs. If not, $267 won’t even come close to buying a plan on your own. Your best bet would be to see if you quality for a state run program where eligibility is based on need.

Finally, as little as possible should be spent in the last two categories. You need to find forms of entertainment that are free or very low cost.

There – that gives you a workable budget. It’s tight, but you can survive on $32k per year.

Another Note On Reducing Expenses

Reading the above may be discouraging. Cutting $18k of expenses may seem daunting. But, don’t forget about expenses that you will no longer have with one spouse is staying home.

You won’t have to pay for childcare. The amount you spend on clothing and gas should go down. You will most likely eat out less as well.

In fact, you may find that your standard of living doesn’t have to change much.

It is Worth It?

When we made the decision to make the transition to a one-income family, it was a no-brainer.

Whitney and I both agreed that her being able to stay home with the boys was far more valuable than her paycheck. It’s all about priorities. Our priority is family over finances.

Would you be willing to give up one income to say at home with your kids?

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12 Responses so far.

  1. I’m not in this situation yet, but I can imagine giving up a salary. Kids and other things are far more important to me than money is. Life might be a little less luxurious, but I still think that’s a good tradeoff.

  2. I think cutting savings is a bad idea. I’d rather see cuts in housing or somewhere else. You never know when an emergency will take your entire emergency fund and then some.

    • Jeremy says:

      If you can find a way to reduce expenses in a way that allows you to save that would be ideal, but in most parts of the county it you’ll be using every bit of that housing budget on even the most modest housing.

      I live in Oklahoma, which has one of the lowest costs of living in the country – it’s not easy to find a place for under $700 per month. Now, something I should add to the post is that you could probably qualify for Section 8 assistance. If that were the case, you could cut your housing budget and keep savings in place.

      • denise says:

        In my area, Setion 8 has a year waiting list or longer.

        • Wow – I wonder why the wait is so long? Section 8 is one of those programs that tries to do a good thing, but is run so inefficiently that it’s ridiculous. Years ago when I worked as a property manager, I always hated dealing with Section 8. It seemed like they didn’t know what they were doing half of the time.

          While you are waiting for Section 8, I would call every property management company in the telephone book. Tell them what you can afford to spend on rent and see what they have. Most likely, someone has a vacant property somewhere that will fit your budget. Also, don’t forget that rent is negotiable. If you find something that you like that is just a little too expensive, see if they will come down on the price. Or offer some kind of a trade – do you have a skill they might be able to use? Maybe you could help clean units when people move out in exchange for your rent?

  3. We’ve done it. Granted, I’m also going back to school (on grants,) but we’ve cut down a good bit. One thing I would argue with is the car thing. If you already have a car that you’re paying on, I wouldn’t trade it in for a beater. My monthly car payment is far less than what I used to spend on repairs. And I have reliable transportation. I wouldn’t go out and buy a new car after you’ve lost an income, though.
    Love the article.

  4. Aloysa says:

    We would not be able to survive on one income right now as we have too many bills. If we pay off our debt, than it would be possible. Now, it would be a financial disaster.

  5. When it comes down to living life post retirement vs. enjoying life now. I would pick the former and cut down on all unnecessary expenses now.

  6. Dana says:

    I did give up my career to stay home with the kids. It’s worked out well for us – I’ve never regretted it. We don’t drive the newest cars or have the latest phones, electronics, video games etc. For us the key was living on one income from day one of our marriage, building up a large financial cushion for emergencies, and staying debt free.

  7. We are a one income household… and we don’t have children. Things are tight for us because of the large amount of debt we are trying to get rid off. We worked it out and realized that without debt, we could live on a lot less.

    We make due without a lot of wants, but we have been blessed in many ways because I can be home.

  8. Ginger says:

    If you would need help from the government (section 8/food stamps), you can’t afford to tithe, you are within the group that should be receiving the help.

    • Jeremy says:

      I disagree. I can’t find anything in Scripture that says you have to reach a certain income level before the tithe is applicable. In fact, some of the most generous were those who were barely making it by themselves. Check out Mark 12:41-44.

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