In today’s hard financial times, some two income families struggle to make ends meet. A family of four thrives on $ 50k a year after mom became a stay at home mom to care of their children.
Thriving on one income, when initially life was built based on double incomes requires biting the bullet, gazelle intensity, above all careful planning. The transition is scary whether it is planned or unexpected but it is do-able.
Create a Budget and Stick to It
Create a realistic budget, this allow you to make the best use of your income. Categorize your expenses, and make changes where necessary. Budgeting apps, sheets will help you scrutinize how much you are spending or saving.
A budget, helps you scale down your spending, to pay off debt, live a normal life on your existing income. Create a realistic budget, save money to reach your financial goals. Read my earlier post about budgeting here.
Dave Ramsey says, “budgeting is telling your money where to go, instead of wondering where it went.” Check our library page for free printable budgeting and other resources.
Track Your Spending
Once you have created a budget, typically on a monthly basis, always track your expense to identify areas you can cut out completely or cut back on to save money.
If your expenses are less than your income, it means you are living within your means. If your expenses exceed your income, find areas in your budget that you can cut back on or cut out completely.
Fixed expenses like, mortgage payments, rent, debt payments, car insurance, etc are areas in your budget where you cannot cut costs. If you can’t change cities, consider changing neighborhoods.
Consider moving to an apartment complex without a swimming pool. Never move to an insecure neighborhood for the sake of saving money.
Variable expenses like costs for groceries, utilities, transportation, certain insurance policies etc can be tweaked to save money. There are many different ways to cut back on grocery bills to save money.
Cut down expenses on car fuel, car payments, utilities and other items that fall within the category of variable expenses. Use cash back apps like Ibotta to earn cash when you shop at eligible stores.
Do you really need that huge SUV that consumes lots of gasoline? Or two cars that take a huge chunk out of your income every month? Maybe mom can give the hubby a ride to work in the morning, then hubby can carpool in the evening.
Look for a better deal on cellphone, and Internet services. Switch from traditional cable to streaming service providers Hulu, Amazon Prime, Showtime etc to save money. Check out this comparison between conventional TV and streaming.
Optional expenses such as gym memberships and magazine subscriptions are nonessential costs. Do you really need that gym membership? Work out at home using free online exercises videos. Take advantage of the gym at work, take up running if your health allows to.
Save first so you have money to fall back on when emergencies arise. Set aside at least 10% of your income each month towards an emergency savings account.
Once you have 3 months’ worth of living expenses, pay off your debt quicker., one debt at a time starting with the smallest while you make minimum payments on the other debts. Read my earlier post about paying debt one by one.
Once you have paid off your debts, that amount that you were you using to pay off your debts can be directed to your savings account to build a larger emergency fund.
Once you have saved at least months’ worth of emergency savings, put on hold saving for your emergency savings account.
Paying off your credit card debt should be your top financial priority after saving up 3 months of living expenses.
Strive as much as you can to pay off more than minimum amount on your credit card every month. Minimum payments you only pay interest on your credit card debt. You lose money in the long run.
Put every coin in a jar that you find in your wallet, desk or table drawer, purse, car trays and in your house. They can really add up. Collect your coins at the end of every month, put them into your savings account.
Slowly but surely, these coins will boost your savings. Allocate a portion of that amount to investment account, retirement savings plan, family vacations and giving back for a good cause.
Cut back on grocery expenses
There are many ways to reduce your grocery bill. Shop in bulk for dry foods like pasta, grains, rice, toiletries, canned foods, cleaning supplies, detergents, baby diapers, formula, wipes generally anything you keep for months.
At Boxed, you can almost purchase anything in bulk. Have everything delivered at your doorstep. No membership charges.
Look for store brands. Legally store brands must meet the quality standards before they are allowed on market. So they are equally as good.
Take advantage of essential things on sale, use online, printable or paper source coupons to save money.
Buy only fresh produce often. Buy groceries online, pick them up later to avoid overspending at the grocery store. Depending on where you live, shopping at Farmers Market is cheaper than grocery store.
Plan your meals for an entire week or two. Read my earlier post about meal planning. Involve other family members in planning weekly meals. Incorporate theme nights like soup Fridays, taco Tuesdays and left over Saturdays.
Only buy what is on the list to avoid buying things you do not really need or will not use. Use up whatever food you already have in the kitchen or fridge/freezer before you stock your kitchen pantry and freeze.
Do not go shopping when hungry you more food, more stuff that you do not need. Eating beforehand will help you save money.
Cook almost every meal
Take a lunch to work everyday. Those daily lunch purchases at work cost you around $2500 a year.
Make food from scratch instead of buying frozen dinners. Food tastes better and is healthier.
Invest in an Instant pot. It makes most meals, uses half the time a conventional stove uses while keeping all the nutrients in the food. Hence saving you money on the gas bill.
Make your own cold coffee at home with these recipes, you will save nearly $2000 a year.
Instead of going out to eat and spending $ 15 to $ 20 per family member, cook most meals at home. Limit eating out to once or twice a month. Use coupons/deals. There are many coupon restaurant sites.
Utilize your tax refund & job bonus money
Bonus from your employer, tax refunds at the end of tax year ought to be put in Savings account and debt repayments.
Which means you will pay less interest and fees (if applicable) each month than before. The amount saved on interest payments can go toward debt too.
Sell Your Unused and Unwanted Things
Sell things that you no longer need to make some extra cash easily. Sell your old baby, children’s clothes, gadgets, gift cards, unwanted birthday gifts, unwanted wedding presents, and other stuff that are collecting dust.
Cash is King
Leave your debit cards at home, pay cash for stuff. You cannot spend more than you have when you carry cash, you avoid high interest rates, extra charges. No cash means you can’t afford it.
With credit cards, it is easy to spend money you don’t have to pay for something today but cannot pay the money back in full next month when the bill is due, hence accumulating more debt.
Try envelope system for items that tend to take a huge chunk out of your budget. Things like groceries, school supplies, clothing, fuel and entertainment.
Absolutely no money comes out of the groceries envelope except to pay for food at the grocery store. If you go food shopping, realize that you forgot the envelope at home, turn your car back around!
Make Extra Money at home to Increase Your Income
Make extra money at home using your computer and the internet. If you have any marketable skill, you can utilize it to make money online.
Are good with typing? you can find let data entry jobs online. Do you have a knack for writing? Then you can write articles and blog posts on the topic of your choice for numerous websites and blogs across the web.
Try freelance sites like Upwork, PeoplePerHour, Freelancer and Guru to apply to jobs in categories like writing, social media marketing, web design, graphics design bookkeeping and virtual assistance.
You can sign up for a seller account on Fiverr to offer up your services. When clients find your ‘gigs’ or services you are advertising and they hire you for your services, you can make money by delivering the services. You do not have to bid for jobs.
There are many tutoring sites that hire people with teaching backgrounds to tutor students in subjects like math, history, geography, science and English.
There are many companies that hire people to work as home based customer representatives and call center agents.
There are more ways to make extra money online and offline. Use any extra money you earn to pay off your debts faster or build your savings. Read more about ways to increase your income here.
Bottom line, living on what you have means living within your means. If this family of five can live a normal life on $50,000 a year, you will also be able to live comfortably on that amount.