In our culture, we have a culture of consumerism and spending. Too many people I know spend all or nearly all of their salaries. I find this to be the case regardless of how much money they make. I know people earning $100k a year who have no family obligations that easily spend every cent. This is also the case in many dual earning households as well.
So I’m going to propose something radical: split household spending in approximately half by only living off one person’s yearly salary in dual earning households. How to this is simple. If you are in a household where you have more than one breadwinner, simply pick one of your salaries, and then make your budget as if that’s the only money your household has. Save everything else. Let’s do an example.
Say that we have a couple, Sally and John. Both Sally and John make $50k a year for a household total of $100k gross income. Under this system, we take $50k as one of their salaries. Then shave about 20% off that for taxes (depending where you live) so we’re left with $40k of spending money per year for Sally and John. That leaves them with the other $50k salary to save. Between the 2 of them they can put $18,500 each in their 401(k)s tax free if their employers offer them. Then they can put the remaining $13,000 to building up emergency savings, putting it in their IRA, or some other savings vehicle.
One of the biggest advantages to being married is that you have not only one, but two money making machines in the family! Once you are married you can share everything, so why not share your financial security as well? Both me and my husband work, but my husband makes a little more than me. For that reason we make sure to keep our spending low enough so that everything could be covered by my salary alone. This means that we live far below our means and that we make sacrifices that aren’t typical for young working couples who don’t have children.
We kept this in mind when we applied for a mortgage, making sure to get a house that was smaller so that it was affordable on only one income. We also rarely go out to eat and never drink in bars. These sacrifices are well worth the mental well being and financial security that our lifestyle choices bring us.
Of course I realize that not everyone is married. To those single people, I encourage you to just concentrate on saving as much as you can. And for families that aren’t quite ready to live off just one salary, just saving more is a step in the right direction.
Advantages to Living Off One Salary Even If You Have Two Incomes
1. If One of You Loses a Job, You have a Built-in Safety Net
If you are in a two income earning household and one of you loses your job, it shouldn’t be a problem because you already are living off only one income. The only thing it should affect is your savings. For so many families, one breadwinner losing their jobs is enough to send the family into spiraling disaster and debt. Last year I lost my job and was out of work for several months. But we didn’t have to adjust our spending, because we were already accustomed to living off one income. We barely noticed the dip into our savings and before long I was back at work. Our lifestyle choices prevented my loss of job from being an emergency.
2. It prevents You From Working a Job You Hate
If we had not been able to live off one income, when I lost my job last year I would have been desperate to get back to work. Because when you have bills that need paying, finding a job becomes more urgent. Instead, I was able to leisurely look for another job and accept the right job when it came up instead of accepting the first thing I could get. I was able to hold out for job that was good fit the next step I was hoping to take in my career and in my life.
3. Enables You To Save More
By living off of only one income, we are able to save an amount equal to my husband’s salary in the last year. That’s significant savings!
4. Mental Well-being
By living off of only one salary, you have the mental well being of not ever having to worry about money really. You never have to live paycheck-to-paycheck because you always have one earners salary as savings. This gives you plenty of leeway if ever need more money.