The decision to live on one income is a big one. You may have to cut back drastically on your expenses, such as giving up a cell phone or a car. But for those who dream of having one person stay home, the sacrifices can be worth it. In fact, living on one income may actually make you healthier, despite the reduction in income. How do you know if you are in a position to live on one income? Let’s take a look.
The way to approach the question of being able to live on one income is to calculate your income versus your expenses and changing both to reflect the new situation of having only one person working.
There are several expenses that will be reduced when one partner gives up a job to stay home. These expenses may vary by your situation. It is important to be able to calculate your expenses accurately, so you can be sure whether or not you can survive on one income. Here is a list of those reductions, as well as some tips on calculating theses reductions for your own family.
Taxes: Losing one income should put you in a lower tax bracket, and therefore reduce your income tax payments. The most accurate way to predict how your taxes will change is to fill out an income tax return using the income and other numbers that would apply if you go down to one income. This can be a daunting task, and one that you might not want to make. If you have an accountant, ask if he or she can give you a quick assessment of your taxes based on one income. For a easy way to get a ballpark idea, just look at the amount of taxes that were withheld from the pay of the partner who will be staying home. While it isn’t a perfect assessment, if you didn’t get a large refund or have to make a large payment to the IRS, then this number can reflect the amount that you will save.
Next in this series are several other expenses that may be reduced when you live on one income, such as insurance.
Mary Ann Romans writes about everything related to saving money in the Frugal Blog, technology in the Computing Blog, and creating a home in the Home Blog. You can read more of her articles by clicking here.
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