If you are the sole earner of a family, the pressure to provide can be incredibly high. If you want to keep yourself in a good financial spot, here are some money strategies that you need to know.
The more people there are in your family, the riskier it is to live in on a single source of income. But sometimes, having one parent stay at home to manage other family responsibilities, such as taking care of the kids or managing the business, is worth the sacrifice and the added risk.
Nevertheless, it’s not wise to go from two sources of income to one headfirst. If you have the option to wait before one breadwinner quits their job, here are financial moves you need to make first:
Sign up for all the necessary insurance policies, such as health and life, or make an insurance endorsement to existing policies. Being insured protects you against potentially devastating financial loss in case something happens, such as an illness or an accident, that one source of income might not be able to support.
Build an emergency fund
An emergency fund should contain at least three to six months of your family’s living expenses. This fund will keep you afloat in case the household goes from one source of income to no income at all. Hence, having one is imperative if you plan to have only one breadwinner in the family.
Set a new budget
When you go from a two-income household to a single-income household, there ought to be changes in the family budget to make up for the decreased amount of cash flow. If you have the liberty of preparing before one breadwinner quits, figure out the new monthly budget based on the future income of the house, and consider the expenses that will be saved (or added) when one parent stays at home.
Cut down debt
If you have a considerable amount of credit card debt or an auto loan that is yet to be paid in full, consider pushing back your plan of transitioning to a single-income household until you cut down your debt considerably.
Find other sources of income
If one source of income is not enough to support the household’s needs, the one quitting their full-time job can consider freelancing, getting a part-time job, starting a home business, or looking for jobs around the neighborhood.
If possible, ask for a consultancy position from your current job. You might still have to go to the office from time to time, but you will no longer be working 9-5.
Get rid of unnecessary expenses
Downsizing your expenses is the best way to make the transition to a single-income household easier. For example, you can sell the second car, unsubscribe from rarely used memberships, cancel cable, and maybe even move to a smaller place.
Do more at home
Now that one parent has more time at home, you can cut down the expenses on daycare, babysitting, lawn care, housekeeping, food delivery, and other things that needed to be done when both parents are working.
Living on a single source of income has inherent risks, especially for bigger families, but many providers have proven repeatedly that it is not impossible. To reduce the risk of financial trouble, however, ample preparation is needed before switching from two sources of income to only one.