With more dependents, there is more pressure on maintaining your household income stream, so this is a good time to review what you are covered for and if you need to increase your coverage.Kati Molin
When a friend of mine lost her job last year, she wondered how long she and her husband could subsist on his income alone. They wanted to avoid dipping into their savings for as long as possible. When they gathered all of their bills and tallied their basic expenses, they found that they had four months until their household cash flow turned negative.
"If we lost my husband's job we'd be fine," says my high-earning friend. "But me not working is not an option."
Whether the result of a job loss or a planned departure from work, losing a second income is a challenging and frightening experience.
Before I even got pregnant with our two children, my husband and I were busy planning how to manage the loss of my income during maternity leave. The government maternity leave benefits fell absurdly short of replacing my full-time salary. With my first daughter, I solved the problem by hiring a nanny and returning to work after three months. With my second, I was fortunate to have an employer that allowed me to work part-time from home for several months. I enjoyed the extra quality time with my baby, but returned to work before she was a year old.
If I'm being perfectly honest, I didn't want to relinquish the financial security my salary provides the family. Becoming a single income household would mean a move to significantly smaller quarters and giving up many of the niceties we have become accustomed to, like swimming and piano lessons for our girls. We don't live a luxurious lifestyle, but it is comfortable. My husband and I both know what it's like growing up when money is tight and we have worked hard to avoid that in our home.
I do wonder, though, how families make the sacrifices necessary to live on one salary.
The husband and wife bloggers behind Engineer a Debt Free Life recently wrote this column about their transition from a dual to a single income household.
"It was a scary decision, but it was one of the best decisions we ever made," they enthuse. "We used to never think it was possible to live on one income, but we have been living on one income now for awhile and are happier and better off financially than ever."
Their single-income success seems to rely on old-fashioned budgeting. They tracked all of their expenses, down to the $2 spent on a cup of coffee, and cut many of them out. With the wife at home, their household costs were lower anyway. There was no daycare to pay for, less gasoline, fewer work clothes. "We have more time to save money, find bargains, and use coupons."
One personal finance blogger, who goes only by his first name Steve, recently wrote about the "two-income myth" on his site bripblap. "My family took a big hit to our finances when my wife quit work," he admitted. "We did it by making huge changes in our spending, and after a couple of years those changes have become fairly routine. We understood that we could not afford as many luxury vacations or idle purchases of gadgets and jewelry and so on. The reward was that our children have been able to stay at home with their mother and be in a safe, healthy, fun environment."
If you're strongly in the stay-at-home parenting camp, or just dreaming of a sabbatical from work, you may be wondering what it would take to live on a single income.
You can start by trying out one of the many online calculators to see if you can afford to stay at home, such as this one from Today's Parent.
Or you can do as the Engineer a Debt Free Life duo suggest and conduct a trial period of living on one income. For several months, live off of just one salary. Put all the money from your second salary into savings. Pretend that you don't even have a second salary. After the trial period is up, look at your results. Is this something you could continue doing? Did you even miss the second salary?"
For many families, there simply is no choice but to have two incomes to cover the basic bills. Others agonize over the choice. I've made mine and have no regrets.