Staying at home: How to downsize from dual to single income
There was no way they could do it.
Jonni McCoy was a senior buyer at Apple Computer and brought in about 55 percent of her and her husband's combined annual income. They were already living frugally — or so they thought. Their San Jose, Calif., home was tiny. Their two used cars were paid for. "We weren't living extravagantly at all," she said.
But McCoy and her husband wanted to cut back from their dual income to a single income. She was going to have a baby.
"The conviction to make raising my son a priority was definitely a God-driven feeling that wouldn't go away," she said. "And that's why I needed to do it."
But the numbers didn't look like they were going to add up.
In today's economy, many households are cutting back from a dual income to a single income — whether by choice like Jonni McCoy or because of economic realities like layoffs. The success of such transitions depends on several common factors and plans.
Will VanderToolen sees the transition from two incomes to one every day. VanderToolen is the director of counseling services at AAA Fair Credit Foundation in Salt Lake City, which provides free financial counseling advice to people trying to get their finances in order. And getting finances in order means overcoming bad habits.
"It's easy for us to expand our spending habits when income goes up," he said. "But when we have a cutback in income, it is much harder for us as individuals to cutback and stop spending as much."
Half and halving
Jonni McCoy tried cutting back on work hours. Then she tried job sharing. "But it didn't satisfy that desire to stay home with my child," she said. "So I told my husband we just have to do it."
He told her the only way it could work out financially would be if they moved way out to farmland where houses are cheaper. But she didn't want to do that.
They gave themselves four months to find an alternative plan.
"I scrambled to find a way to make it work without moving," McCoy said.
Logic seemed to dictate it couldn't work. But she was determined to find a way to make it work.
McCoy compiled a notebook full of ways to save money. That notebook later was rewritten into a book, "Miserly Moms: Living on One Income in a Two-Income Economy," which is now in its fourth printing with a new subtitle as "Living Well on Less in a Tough Economy."
"At the end of the four months I was able to find ways to save enough that we were doing it — we were living on half," she said.
Step one: Inventory
VanderToolen said the first step is to take an inventory of payments and other expenses. "They need to lay every expense on the table," he said. "Where is income coming from? Where is it going?"
It is the only way to begin to distinguish between needs and wants, he said.
In the free counseling VanderToolen does at AAA Fair Credit Foundation, he brings couples through their housing, utilities, food costs and more. And when he says food costs, he means groceries, eating out, school lunches, vending machine snacks, drinks bought on the way to work and so forth. "You have to nail down every expense," he said. "We even look at bank statements to show the expenses."
Just by looking at where money is going, VanderToolen said most families can easily cut 20 percent from their expenses without noticing any significant change in lifestyle. It shows just how much of a family's money is eaten up by little things here and there.