Thursday, June 15, 2017

How to Survive On One Income

As I mentioned few weeks ago, my husband recently went back to school full time, even though we swore we were done with degrees. Life, as they say, is full of surprises. 

This means that for the next three years, I will be the main breadwinner. Which is kind of scary, considering I don't exactly make a six-figure salary - far from it, in fact. Plus we'll have to borrow money for tuition, adding to our already crushing student loan debt. It's not a perfect situation, but it was a now-or-never moment, so here we are. 

Obviously we're not the first family to drop down to one income. In fact, we're better off in a lot of ways than other families who take this plunge. Our situation is temporary and will eventually lead to a new income bracket, we're used to living the frugal life, and we don't have a lot of the responsibilities (like children, consumer debt, or a mortgage) that other couples carry. If anyone can live off one income, it's us. 

That said, this transition is still nerve-racking and frustrating. We'd been making such good progress in our quest to eliminate debt and build our savings! While we haven't had to dip into our emergency fund, further progress is officially on hold.

Rather than mope about our stagnant savings account or pout while scrolling through Zillow listings, I'm trying to look on the bright side and embrace this new challenge. Yes, we've been broke students in the past, but that was before we learned how to budget. Things are different now. We're older, smarter, and much more savvy. We have a clearer sense of what we want out of life as well as the sacrifices it takes to get those things. We know how difficult it is to get out of debt, and we don't want to make it even harder. Plus I've spent a lot of time railing against capitalism, consumerism, and class systems. It's time to walk the walk and truly live on less.

As of today, we've been on our one-income journey for two months, and so far it hasn't been too painful. A number of things have smoothed the transition, and I'm sharing them here in the hopes that they may help someone else.

1. Build your emergency fund first. 

If you're dropping down to one income, an emergency fund is key. Not everyone has the luxury of saving up piles of money before a big life change. Sometimes the transition is sudden, and that can be a very difficult thing. That's why you need to start saving right now, this very second, no matter how "safe" or "secure" you may feel. The best money advice I ever read is "The Story of a Fuck Off Fund," and I encourage you to read it, too. An emergency fund - which is what a fuck off fund is - gives you the freedom to make the choices that are best for you, bank account be damned. We were lucky enough to have a modest savings account, which serves as both a safety net and a salve - it's there in case of emergencies, and in the meantime it makes me feel better.

2. Revamp and revise your budget. 

While discussing whether or not we could handle living on one income, we had a year's worth of data from YNAB to help. We were able to look at our bills and expenses and figure out the minimum we needed to get by. I'll admit - once we paid off $13K of credit card debt, we loosened the purse strings. Growlers of fancy beer from our favorite bottle shop. A weekend trip with some friends. Vegan marshmallow pumpkin bars from the co-op. I even bought a book instead of getting it at the library! Once we realized our income was about take a hit, our budget made it easy to identify these areas of lifestyle creep and rein them in. We also had to revise some of our long-term goals. Goodbye, summer vacation in Seattle. I hardly knew ye, Christmas gifts. See you in approximately five years, new-to-us car. Good things come to those who work, and we've got a long road ahead of us. 

3. Pay off your debts ASAP. 

One of the other reasons this was a good time for my husband to go back to school was because we are, for the first time in a very long while, 100% free of credit card debt. In addition, we don't have a mortgage, we paid off one of our cars seven years ago, and our other car payment is tiny and interest free (thanks to our generous in-laws). We don't have kids. Hell, we're even down a dog. (Rest in peace, sweet Seamus.) We'll probably never need or owe this little again, which means if we're going to slash our income, we better do it now. 

4. Apply for Income Based Repayment and/or defer your loans. 

Many people feel conflicted about IBR, but for our family it's the right choice. The majority of our student loans are in my name - we're talking six figures. I'll never pay this off, no matter how many hours I work or how many promotions I receive. (Content marketing and novel writing are not the most lucrative fields.) Thanks to income based repayment, my monthly bill is very manageable and the balance will be forgiven at the end of 25 years. Yes, I'll have to pay taxes on whatever is left over, and yes, that will be huge, but I have plenty of time to save up for it. Meanwhile, Nathan was able to defer his student loan payments while he's in school. While he owes far less than I do (for now, at least) putting those bills on hold has helped. 

5. Find budget-friendly hobbies and friends. 

Here is a short list of free or almost free things I'm looking forward to doing this summer: weekly wine tasting at Wilmington Wine; beach days; joining the local bike club for group rides; going to the dog park; free Shakespeare plays at Greenfield Lake; weekly board games with friends; my annual backyard birthday bash, complete with cornhole tournament; front porch happy hours; book club meetings; free summer concert series every Friday night downtown; writing dates with my BFF at the coffee shop; $5 movie night on Tuesdays; writing this blog and maybe even my novel; reading books in the hammock. Depending on where you live, your mileage might vary, but this is a good place to start.

6. Look for part time gigs and side hustles. 

Nathan has a part time job that brings in some money each month. I still freelance on the side, writing articles for local magazines and the occasional essay. Since this income is not guaranteed and varies month to month, we didn't count it in our original round of number-crunching. When we do get a check from outside our main source of income, it's a great buffer and helps fund some of the "fun" stuff we originally cut. We also hosted a yard sale at the beginning of the month, and we continue to sell extra eggs to our neighbors. Every little bit helps. 

7. Adjust your expectations.  

Because we were already super frugal and accustomed to living on less, dropping down to one income hasn't been a huge adjustment. The only aspect I've found truly difficult is the mental and emotional side of things. I hate that our savings rate has slowed, and that many of the dreams we had (like buying a house!) have been put on hold yet again. For example, at this time last year I was regularly putting $800 a month towards our financial goals. Last week I was able to put $30 into savings, and it felt like a goddamn miracle. As much as I celebrate being a late bloomer, there are times when I wish we were further along on our journey. I try not to spend too much time thinking about what could have been - it's not productive, and it's better to use my energy making what is as good as I can.

If you have tips for living on one income or hacks I haven't considered, feel free to share in the comments or on my brand new Facebook page. I'll take all the help I can get!