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You Can Money: How We Went From Two Incomes to One

This article is an installment of our You Can Money content series, where we highlight the journeys of people who have found ways to redefine their relationships with money.

Imagine living on half of your household’s current take-home pay.

You may need or want to do this for a variety of reasons, like if a partner loses a job, because of an unforeseen medical circumstance, or someone wanted to stop working to look after a growing family.

Marc A., a 40-year-old internet marketer and blogger, and his wife, Crystal, decided to shrink their income once they knew their family was going to expand to include their first child.

Here’s the things they considered and how they made the transition from living on two incomes to living on one.

They were clear on why they wanted the change

When Crystal became pregnant with their first child in 2012, the couple decided she would stop working to focus on caring for their new daughter.

Back then, Crystal worked as a project manager for a national bank where she was making a high five-figure annual salary. Marc was self-employed and netting six figures a year from his business.

“We had friends [in relationships] where the mother had gone back to work, and we had some friends who stayed home,” says Marc. “With the cost of daycare being so high, it seems like you are working just to pay for daycare. Driving the child to daycare before work and then picking them up after — it just doesn’t leave much quality time.”

They had always lived well below their means and already had a year’s worth of savings in their emergency fund and created a budget that required living.

They budgeted to live about 15 percent below Marc’s average salary. Their mortgage for their home in Pennsylvania was $1,400 a month. They needed $4,000 to cover their monthly living expenses.

The biggest question for the couple was whether they were going to stick to their decision.

Experiment before committing

The couple tested out living on a single-income one year before their daughter was born, and six months during Crystal’s maternity leave, which was 12 weeks paid and 12 weeks unpaid.

During this transition, they lived on Marc’s income and saved what Crystal earned. They were able to boost their savings to about two years’ worth in reserves when they decided it was time for Crystal to leave her job. They wanted to save as much as possible for a rainy-day fund partly because Marc’s income as a self-employed business owner can be unpredictable.

Make adjustments for trade-offs

With Crystal at home, the couple estimates that they save about $1,200 in childcare costs each month.

When they had their second child, a son in 2015, the largest new expense was the additional $250 they spent on health insurance every month, pushing their premiums to about $700 a month. After extensive research, Crystal found it would be less expensive to be on two separate plans for each partner and a third plan for their children.

The family expects Crystal will start working again once both kids are in school.

How to go from two incomes to one

Want to make the switch to a single-income household? Here are four steps to take:

1. Create a new budget

You’ll want to make adjustments to your budget and calculate your monthly living expenses. From there, see how much you need to earn to live on a single income. Consider additional costs, such as self-paid insurance premiums if you’ll no longer receive a company-sponsored health plan.

2. Slash expenses

If you aren’t able to live comfortably on one income right away based on your current budget, then look for opportunities where you can cut expenses. According to the Bureau of Labor Statistics’ Consumer Expenditure Survey, three major living expenses are for food, transportation, and housing. You may be able to net big-time savings by starting to examine those three spending categories.

3. Test it out

If you are going from a two-income household to one by choice, try a practice run before you commit. Pretend the other income doesn’t exist and stash it away in a separate account instead. Marc and Crystal gradually made the switch to one income by saving her earnings received during maternity leave.

4. Keep saving

Marc and his wife made sure to have anywhere from one to two years of living expenses in an emergency fund. While it’s typically recommended to have three to six months of expenses tucked away, if you’re living on a single income, consider saving on the higher end of that range or even more if possible.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.