Staying at home: How to downsize from dual to single income

Published: Monday, March 5 2012 6:00 p.m. MST

Jonni McCoy had a budget, but she said most people don't spend exactly what their budget tells them to do. The only way to know how a budget is working is by looking at every ATM, every credit card, every receipt. "Then you will have a better understanding of (what) you need to work on," McCoy said.

Step two: Advice

Because spending is so tied to lifestyle and emotion, VanderToolen recommends getting some outside advice to look at the finances. Naturally, he recommends a reputable organization like his foundation — with a warning there are many fraudulent counseling agencies out there. But a person could also go to their bank or credit union and ask to speak with a financial advisor. "You need someone who is not entrenched in your life," he said. "You need hard advice. You need tough love."

Step three: Move quickly

The third thing VanderToolen advises is to move quickly. Not everybody has time like Jonni McCoy did to make plans. If the second income was lost suddenly, changes need to be made as fast as possible. Draining savings and taking money out of a retirement account is not a solution.

People also can't wait for problems such as missed payments to force them into action, VanderToolen said. By then, many options would disappear. If people need to restructure their loans, they need to have good credit. "They think they have time and everything is going to work out," he said. "These days there is no room for give in lending anymore."

Step four: Make a budget

"It is a sad truth that it is very rare a family actually has a budget," he said. "Most people just check to see if they have money in the bank and then spend it. They don't have a plan."

But a family that is downsizing must have a plan.

The budget is built from the information gathered from taking the inventory. Seeing the actual expenses and the actual income makes it easier to cut where needed.

And the cuts keep coming until the budget is balanced. "Cash flow is simple," VanderToolen said. "Money in. Money out. You can't spend more then you make."

Jonni McCoy divided her family's budget into "things we can change" and "things we can't change." For example, the mortgage payment was in the "things we can't change" category. Food was in the "can change" category.

After dividing expenses into these two categories, McCoy said people should list items from the largest to the smallest.

This is how she identified food as the largest changeable item in her budget.

She cut it in half by changing how she shopped and how the food was prepared.

Half of McCoy's book shows the ways she was able to save money — especially in the food category. "That's where we found hundreds of dollars of savings each month," she said. "We used those savings to pay other bills."


In some households, the expenses — the real, must-have expenses — are more than the income. VanderToolen said these situations really do need good counseling — such as HUD-approved counselors — that can help determine if a couple needs to leave their home. He said it is important, in those situations, to know how to exit a home properly to avoid adverse financial impact on credit ratings and the like.

But if a couple has time to plan downsizing to one income, VanderToolen recommends living off only one income immediately. "Take every single dime and put it in savings," he said. "Act like the income does not even exist. It is gone."

He said this is the best way to get ready — not only for changing the way a couple lives and how they spend, but it also helps to take the soon-to-be-lost income and create a healthy emergency fund.

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