How My Family Lives Debt Free on One Income
We can all agree - having more money would make our lives easier. Or would it? In some ways, yes. Making a bigger income does allow us to loosen the purse strings a little. But in many ways, the amount on our paychecks only goes so far to help us build our savings account and pay the bills. Why?
Because financial stability all comes down to how you spend it.
Take it from me. I went from a six-figure income job to a no income job of being a stay at home wife and now mother overnight. My husband and I made the decision a few years ago when we were first making plans to move to Minnesota. I was unhappy with my career, stressed out, and growing increasingly ill. We both knew we wanted a family someday and that I wanted to be a stay at home mom once we had kids. So we took a leap of faith and went from two incomes down to one. No, I didn't have a side hustle or some extra income from signing up with an MLM. We literally dropped my income and chose to make life work off of one sole income.
And to this day, we still live off this one income. How is this possible? Well, to be honest, it's not always easy. It takes hard work, discipline, and a whole lot of self control. But my husband are able to survive, save money, and enjoy pleasure off his income while staying debt free. This is because we've learned to be conscious of our spending and live within our financial means.
Here are my six top tips for living life within the paycheck you make and staying financially stable.
1. Set up a budget and stick to it
You can't expect to save money and live within your means if you're not taking the time to set up a spending versus savings plan. A budget doesn't need to be complex, but it needs to be accurate and manageable. I set up my budget for the upcoming month on the last day of the current month. At this time, I'm entering the last expenses from the current month and have a fresh perspective of what we spent and saved and have a good idea of spending goals for the coming month.
Notice I said spending goals not savings goals. Again, what you spend determines what you save.
The second part - sticking to your budget - is the most important. This might mean saying no to eating out with friends when you've hit the spending limit on the "dining out" portion of your budget. It might mean avoiding the mall for a few weeks. But trust me, feeling awkward for ten seconds when telling someone no is totally worth the gratification of being able to see your spending account in the positive at the end of the month versus the negative.
2. Set money aside for dept payments/savings first
When setting up your budget it can be easy to enter your projected earnings from your paycheck first, enter in your projected spending and expenses, then take a look at your projected savings. I don't recommend this. Although this route doesn't seem harmful, all it takes is a spur of the moment purchase or expense to talk you out of putting money away in savings.
I personally treat our savings account as an expense. That's right. When Brighton gets his paycheck, 10% goes into our savings account every time, no questions asked, as if paying a bill. We even set this up as a direct deposit so we're not tempted to spend it. I treat this just like rent. It has to be paid to our savings account each paycheck just like we have to pay a set amount of rent to our landlords each month.
Then, I set up my monthly budget and review how much we can save after expenses apart from what we already invested into savings. This way, we're basing our spending on a smaller amount than what we actually make and helps to ensure we live within our means.
The same goes for paying loans and credit card debt. Pay these first, then plot out the rest of your expenses. In order to get out of debt, paying these bills must be your first priority.
3. Cut expenses where possible
Not every purchase is a necessary purchase. Many purchases will only bring you temporary satisfaction, and by the time you file through your receipts to enter them into your budget, you don't even remember why you made the purchase in the first place. Those types of purchases are the first cuts to make in your budget.
My husband and I have made a few more extreme cuts and get grief from people about these all the time. We only have a basic Netflix package and the occasional movie rental from Amazon Prime for our television. No cable, no satellite TV. We don't spend much time watching television, and it is such a time waster anyway. We'd rather play board games in the winter or spend our time outdoors in the summer. And if you think about it, how many channels out of the thousand that you're paying for, do you actually watch? Maybe five? Those five channels are not worth the extra expense in our budget book.
We also have basic cell phones. WHAT!? Yes, you read that right. We've said no to smartphones. As convenient as smartphones are, my family doesn't really need them on a daily basis. I have an old hand-me-down iPhone I use as an iPod and a camera and can often use the apps and such when we're out because almost every place you go offers WiFi these days. Paying for a data package and hundreds of dollars on the latest cell phone isn't worth it for us. We also enjoy not having an addiction to our phones and being able to spend time together unplugged from the rest of the world. So even outside of the financial aspect we've noticed other benefits from saying no to smartphones. But ditching the smartphone isn't for everyone. If you can't live without your smartphone, find another area to make a cut.
4. Have fasting months
A fast is going without something for a certain amount of time. We do this in our budget quite a bit. Most often it's in the "dining out" section. We will choose a certain month and decide not to eat out for that entire month. This is not easy, especially at the end of the month when you're tired of cooking. But we save so much money! Yes, it's hard to tell people no when they invite us out, but we explain the reason and try to set up another time or invite them to our place for a home cooked meal instead. You can still have a social life during a fast. It just takes some creativity.
We usually have our fast months after a bigger spending month. January is a good one, because we feel pretty poor after the holidays and are more on fire with starting the year off right. And then around June we tend to have a fasting month as well. Somehow, our auto insurance, license plate renewals, and other random expenses all come up around this time so we fast in another spending area to soften the blow. Other good areas for fasting are clothing, sports and recreation, coffee shops, and movie outings. You don't have to choose more than one area though. The point is not to make life miserable. You still have to live a little!
5. If you don't have the funds right now, don't buy it
Other than a home mortgage, debt is not necessary. Credit card debt, car loans, and loans for other high ticket items cause you to pay more in the long run for your purchases due to interest rates. If you already have an ongoing loan, try to pay more than the minimum amount due no matter how small. Paying an extra $20 to $50 toward your loan each month will add up in your favor over time.
And beware of payment programs. They're disguised to make you think you're getting a good deal by paying only three payments of a set amount of money. But I guarantee the three payments add up to more than the total up front cost and to more than the product itself is worth.
Now credit cards are not evil. They help build credit scores (which comes in handy when buying a home) and many offer money back rewards. But treat them like cash in your wallet. If you wouldn't be able to pay cash for the item your buying, hold off. When you do use the credit card, log it in your expense record as if it were a normal purchase from your spending account. When the bill comes at the end of the cycle, you can pay it in full knowing you already accounted for this money and can avoid paying interest later on.
6. Save your receipts and track weekly
Save your receipts from every purchase until you've recorded them in your expense tracker. This will help you visualize what you're spending money on as you sort through them. Also, go over your budget and enter your expenses on a weekly basis. We set up our budget for the month but enter our purchases at the end of each week. By doing so, we are keeping a fresh perspective of what we have already spent, how much we have left, and the areas we are being more frivolous with. It also makes it quicker to enter a week's worth of purchases versus trying to round up and organize a month's worth of receipts and enter all of them in at once.
So there you have it. My six top tips for budgeting. Keeping track of finances is a chore, but it's a necessary one. Without tracking our spending and setting up boundaries, money has a way of disappearing faster than we can blink.
I'd love to hear your perspective on budgeting and finances in the comments below. Do you have a set budget? What are some budgeting tips you have to stay on track?
This is like the coffee talk corner. Sometimes I give organization tips or relationship advice, but a lot of times I'm just sharing about the everyday moments that make up my life.