It’s this question that is on most of our minds before and perhaps even after we have our first baby (or babies, in my case): can we live on one income? It is one thing going back to work after you have a child if you want to, but it is quite another if you have to. Are you really able to exercise a choice at all? The answer, for the most part, is yes.
Most people I speak to want more money, regardless of what they earn. So whether they earn £30k, £45k, £60, £80k, or more, it never seems to be enough. The truth is that it’s not necessarily a case of earning more, but of managing our money better and learning how to make our money work for us.
Not quite sure you believe me? Look at Michael Jackson, the king of pop, he died leaving millions of dollars of debt and only a couple of valuable assets. And it was only a few years ago that Whitney Houston had to sell off many of her assets to pay off her debts. Both of these stars earned millions during their singing careers.
So how do we manage our money better and how can we get our money working harder for us?
1. Know what is important to you
We have to start off by knowing what is really important to us. In other words, we need to know what we truly value and then spend our time and our money accordingly. If we know what we value, it is easier to make difficult choices. For example, if it is more important to you to be able to spend time with your children than to have all the little luxuries that having more money has to offer, then you’ll make the choices necessary for you to be able to do this i.e. working or spending less.
2. Set yourself a budget
We need to set ourselves a budget and stick to it, as closely as we can. Budgeting is one of those things that many of us know we need to do, but fail to. However, budgeting is the one thing that will let us have a little of all the things we want, i.e. the annual holiday, our weekly entertainment, nice clothes, a decent haircut, etc, while making sure we are saving for our futures. It’s also the one thing that will keep us out of the red.
We have to plan how we’re going to spend our money otherwise we spend it as the need / want arises in the moment, without a thought for tomorrow. Budgeting is also the best tool I can think of to not only show us where we are wasting our money, but also that we do not need as much as we think. If, like many others, you don’t know where your money is going, I can guarantee you that a budget will help you sort out this problem.
3. ‘Get the most bang for your buck’
Martin Lewis, Money Saving Expert, would agree with me when I say that it is very often not a case of doing / having less or earning more but rather a case of finding cheaper alternatives for the things we do / want. It’s often our apathy that keeps us from putting in the effort to find the best deal for our money on things like utilities, phone and internet, holidays, etc. If it all seems overwhelming, try tackling one of these things a month.
4. Be proactive about growing the money you have
We need to have a strategy that will get us the best deal for our savings and investments. Our strategy has to be balanced in terms of our short, medium and long-term financial goals and it needs to be sufficiently diversified across the various asset classes (cash, property and equities) to give us a stable return in the long run. I know this part of money management can be a little overwhelming, but it doesn’t need to be. If you know the basic principles, you can take it from there.
So, can you sustain your lifestyle when one income falls away and you live on one income? You can more than you think. Yes, it may take some effort and it may mean doing some things differently, but it can be done, especially if you set as a pilot light the things you really value in life.
If you need help with any of the things I have mentioned here, please do take a look at my Road Map to Financial Freedom , 21 lessons to help you make the most of your money.
Author: Liz Lugt, Speaker, Trainer and Mentor. Liz can help you discover what your passion is, make a living out of doing what you love and overcome the things that hold you back. She does this by drawing on her skills as a qualified Chartered Accountant, her experience in business and her own personal journey in following her passion. Liz lives in Twickenham with her husband and three children.