Can you live on one income?

For the last few years, Sarah and I have established a very simple goal. We live entirely on the larger of our two incomes and sock the entirety of the other salary into savings. So far, we’ve basically been able to pull this off.

Why do this? There are three big reasons.

First, it establishes a very clear baseline for our savings for the future. We know that one of our income streams is going entirely to savings, which means we can essentially exclude that from our living budget. There’s no questions about how much we should save and how big of an element it should be in our budget. Instead, our budget involves a very tiny amount for savings (mostly just growing our emergency fund).

Second, it means we’re saving a lot for the future. We decided long ago that we were going to strive to “retire” as early as possible, which essentially meant that we would follow some life goals that didn’t revolve around earning income.

We want to spend quite a few years doing volunteer work while we’re still physically able and mentally sharp. I’d like to spend some significant time focusing on fiction writing, which isn’t a real lucrative path if you’re needing a strong income stream. Our savings plan enables us to work toward this goal very effectively. 

On top of that, this type of savings is going to make our dream of being able to travel internationally with our children when they’re older much, much easier. We would like to go on several international trips with our children during their teen years, which is going to be pricy. We now know we will be able to swing this dream.

Third, it keeps us frugal. We don’t have tons of excess money to spend, even if we wanted to. It doesn’t even go into our main checking account. Frankly, we don’t need that excess money to enjoy life. I’m sure we could find ways to spend the income we’re saving, but that spending really wouldn’t add to our quality of life in any significant way.

Our current budget does reward us for active day-to-day frugality. We still have financial motivation to buy generic items, to look for ways to use less energy, and so on. We see the rewards for this much more directly than if we were earning a lot more and didn’t have to think nearly as much about our bills.

The question then becomes whether you could do this. If you’re in a dual-income household, could you make ends meet if one of you simply deposited your entire paycheck into savings and investments for the future?

Even if it seems mighty challenging or even impossible, I encourage you to at least sit down and check as to whether or not you could do this. A few tips if you’re considering this kind of approach:

First, assume that you’re going to cut back on the frills of your lifestyle to make this work. Some of the more unnecessary expenditures in your life will have to go. Everyone has different routines and different expenditures, but we all have things that are less necessary and important than other things. Likely, you’ll have to make some big decisions to make this work – cutting back on frills and probably even cutting some big things, like downsizing your home.

Second, your lifestyle often expands – and shrinks – to fit your income level. If your “income” is just the amount coming home from one wage earner, then your lifestyle will shrink to fit it. The shrinkage might be a bit uncomfortable, but it will become natural over time.

Third, the entire process becomes easier if you have some big goals in mind. Whenever I think about our future plans, I picture two things. I picture our daughter at the Eiffel Tower (something she’s already obsessed with, even in her early childhood), and I picture Sarah and myself on an Appalachian service project. Those two pictures in my mind help me to keep moving forward.

Finally, it can really push you to increase your income. Whenever your income feels tight, you feel a lot more motivation to get out there and find new ways to earn money. It’s a lot easier to run faster if you can feel the wolves nipping at your heels.

This kind of move is the kind of big, audacious step that can make a life-changing difference for you and your family.

The post Can You Live on One Income? appeared first on The Simple Dollar.