A common goal I’ve heard from newly married couples is the desire to move to one income when they start having children. Even if it is years away, it is never too early to start planning for this goal.
There is not necessarily a one-size-fits-all way to plan for moving to one income, but this post will give you some things to consider.
Live on just one spouse’s income
Although it may not be possible is all circumstances, the easiest way to plan for one income is to go ahead and start living on one income. You can even set it up, so that the wife’s income goes into a separate savings account, so you don’t even see it.
Practicing living on one spouse’s income can be important in forcing spending decisions to be made now, instead of later. You do not want to be in a position where you have always been assuming you are going to have two incomes. Moving down in lifestyle is a lot more painful than always being accustomed to a more conservative way of spending.
Pay off debt and save/invest
Whether a couple is able to practice living on one income, and especially if they cannot, aggressively paying off debt and saving/investing can be a very good idea when planning to move to one income. Paying off debt can reduce monthly expenses to make budgeting for a lower income easier. And getting a quick start on saving and investing can help prepare for the future, when savings rates will surely be much lower.
Career planning
Planning for one income is an important reason for the husband to think through his career. If a higher income is needed to support his family, it is always preferable to think through and position yourself in advance, as opposed to having to make quick, reactionary decisions when the time comes.
Budgeting for changing expenses
It is also important to adjust your budget and account for expenses that will change during this period. The importance of budgeting was emphasized in an earlier blog post.
Although many expenses may change when having a child and moving to one income, here are some to keep mind:
Increase
Baby costs
Health insurance – Health insurance costs will likely increase with your family size increasing. You are almost surely going to hit your deductible in the year of birth as well. Changes in insurance costs are also very dependent on how you are currently getting insurance – if it is through the wife’s employer, you will definitely want to investigate thoroughly to understand what your options will be after she stops working.
Life insurance – Life insurance becomes much more important to have as your family grows.
Decrease
Taxes – Obviously, with a lower income, the couple will pay less in taxes. After having a baby, the family will qualify for the child tax credit.
Food – Perhaps, you will eat at home more.
Gas OR other work-related expenses
These lists are obviously not exhaustive. The point is that it is important to think carefully about how your life and spending will change, so that you can be prepared.
If you have any comments, questions, or ideas for future posts, please let me know
I hope you found this post helpful and educational. If you have any comments, questions, or ideas for future posts, please let me know. You can reach me directly via email at crawford@ulmerfinancial.com.
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