The birth of a child. Becoming a caretaker for an elderly parent. A spouse going back to school. These major lifestyle changes can lead to the need for a family to downsize to one income. After living with two incomes, there can be some major changes you’ll have to navigate. But you can do it – especially if you take time to plan ahead.
Build your savings
Barring an unexpected life change, taking time to plan for a significant transition can make the burden easier to bear. If at all possible, build an extra cushion in your emergency savings by living on one income and saving the second income before the change occurs. To get the most out of your money, select a savings account with a high rate of return like First Internet Bank’s Money Market Savings account which earns a 0.90% APY (annual percentage yield) on daily balances of $250,000 or less, and 1.16% APY on balances greater than $250,000.
Review and revise
Sit down together, and review and revise your budget. What are the extras you can live without? Trim the fat by cutting out unnecessary subscriptions, dining out and being more mindful of purchases in general. With one less person working and commuting, are there some tasks you now have time to do on your own instead of paying someone else – such as childcare, cooking or cleaning?
Review your health insurance. Will there be added costs or savings from being on one plan? Do you have adequate life insurance for your working spouse? Revisit your retirement plans and create an IRA (Individual Retirement Account) for the non-working spouse. [Shameless plug: First Internet Bank offers IRA CDs.]
Change your banking practices
We’ve already mentioned savings accounts and retirement funds, but it might be time to change how you think about banking as a whole. You may need to downsize your home and mortgage to accommodate your smaller budget. If you currently have a 15- or 20-year mortgage, you might consider cutting monthly payments by refinancing to a 30-year mortgage. (We can help with refinancing!) Interest rates are still relatively low, and the lower payment could significantly reduce financial stress.
Lastly, check on your checking. If you don’t already have one, look for an account – like one of First Internet Bank’s Online Checking Accounts. Every little bit helps, when you’re facing a reduced income.
A few small changes and a thorough review of your current budget can make a positive difference in living with one income. And for some families, the small financial sacrifices can reap giant rewards in quality of life.
As always, we’re here to help with your financial transition. Contact us today at 1-888-873-3424 or email us at firstname.lastname@example.org if you have any questions.