Starting a family is an emotional milestone many young couples dream of. Most of us know what to expect when we embark on this life-changing journey – happiness, fulfillment, sleepless nights and crying babies. But little, if anything, is said about the challenges of transitioning from two incomes to one.
Just as your expenses are about to skyrocket, you must also adjust to a single income. With a little preparation, however, you can make the transition painless and easy.
“As soon as you know you’re having a baby, you should start preparing financially while you still have two incomes,” says financial adviser Deborah Kent, owner of Integra Financial Services.
The best thing a couple can do when dropping from two incomes to one is pay off debt, to ease demands on their finances once their income decreases, Kent advises. “You can pay off credit card debt, or if you have too many credit cards you can consolidate the debt into one, or transfer to a credit card that might offer an interest-free period to pay it off faster.”
Making extra mortgage repayments while you can is also advisable, as it will allow you to use the redraw facility if you need to. “If things get difficult, you can talk to your lender and use the redraw to make a few payments,” Kent says. “Or you can talk to them about making interest-only payments for a while.”
Set a budget
Work out a budget that depends on one income, not what you’re used to. Make cuts wherever possible. With a new baby to look after, you won’t have the time or energy to dine out, so that will be an easy item to cut.
“Changing the way you do things can help you manage better when you go from two incomes to one,” says Kent. “Instead of going out to dinner with friends, invite them over and ask everyone to bring a plate. Or you can have family outings over breakfast instead of dinner – it works out cheaper.”
Other items you can consider cutting include subscription television, gym membership or an expensive take-away coffee addiction.
Buying bulk at discount supermarkets such as Aldi and Costco can save you an enormous amount of money. You’ll also need to shop less often, which will save you time, too.
“If you shop every week there is a temptation to buy things you don’t need,” says Kent. “Instead, consider doing bulk shopping once a month and buying perishables when you need them.”