We live on one income. A teacher’s salary. That’s the one income we are guaranteed each month. We do have some extra money that we earn on the side from Ryan’s reffing job and my Etsy shop, but it varies and comes second to our family.
I purposefully used the word “Thrive” in the picture above because I wanted to focus on the positives of budgeting and not just getting by. Sometimes in life we do have to live on bare minimum to make ends meet, but I think we all want to thrive at a certain point. Thriving for us financially is saving for retirement and college, never going in debt, tithing plus more, and enjoying some things like vacations.
Living on one income sounded a lot easier before it came to fruition. We strategically planned for this because we knew before we got married that I would stay home when we had kids. I was a teacher as well. It’s no secret what teachers make, so we choose to live by these 5 things to help us grow financially while living on one income.
1. We bought a house we could afford
It all started with this! We had two goals when buying a house – To get a 15 year note and pay extra on top of that, ideally double the mortgage. So we needed to make sure we could afford the monthly payments (and some). I’ve said this before, but a good rule of thumb is your mortgage should NOT be more than twice your household’s total annual income. Not the value of the house, just the amount you borrow from the bank. This is not a science, but a recommendation. This comes from the book The Millionaire Next Door. I talk more about it in this post where I share 3 tips to consider before purchasing a house. Our mortgage was around $970 (plus $360 property tax), and Ryan actually paid DOUBLE the mortgage for an entire year before we got married and I brought in any income. One teacher salary and we paid $2300 a month towards the house. This was well over half our household income. It cut our time in half of paying off our 15 year note. Once I got a job, we threw a third payment towards it, then a fourth, and fifth, until we paid it off 33 months after purchasing it. This was all possible because we bought a house we could afford. This freed up our ability to live off one income once we had kids. Regardless if your house is paid off or not, it’s still important to buy a house you can afford. It’s amazing how much more we would have paid for our house on a 30 year note. Even worse, the hundreds of thousands we would have lost in investments for retirement.
2. We buy our cars in cash
When you’re living on one income, you have to get your monthly expenses LOW. Having a car payment can be a huge expense. The week after we were married, Ryan paid off the remaining $8,000 I owed on my car. His was already paid off since he bought it in cash. We have spent the last few years (intentionally for the last year) saving for a new car so we can pay cash for it. We’re always saving for big purchases with any extra money we make, which makes it easier to purchase big things when we need them. Cars depreciate fast, so it’s definitely something you don’t want to finance if you can. Read this post to see how taking on monthly car payments can cost you millions of dollars.
3. We never go into debt
Never ever would we purchase items on a credit card if we could not afford them. If we make X, we spend less than X. It’s just not an option. We use a credit card for our purchases and pay them off each month. We do this so we can earn extra money on rewards. We’ll often earn $1,000 a year and use that towards a vacation. Credit cards CAN be good if paid off each month. If it’s tempting to go over your budget with a credit card, don’t use one. One thing that helps us stay out of debt is…
4. We have a savings account (emergency fund)
Unexpected things come up. They just do. Kids get sick/hurt, car accidents happen, big appliances break, you lose your job, etc. Having a savings account keeps many families out of debt. We always try to under budget for small unexpected things, but if something major occurs, we can pull from our savings account. Just make sure to pay it back. It’s recommended you have a $1,000 emergency fund and 3-6 months salary saved up in the case of a job loss.
5. We keep our expenses low – Budget
Budgeting is the key to living on one income (any income for that matter). We know where every dollar goes in our budget. We track each expense every month. Having few and small expenses is important if money is tight. It’s not fun, but cutting out things like dining out (just some…you know how I love eating out), entertainment, house updates, and more is important when you’re trying to save money. We didn’t have cable for the first 7 years of our marriage and I dyed my hair brown (my natural color) right after our wedding until we had enough money to dye it back blonde. I suggest dissecting your budget and highlighting the categories that are non-negotiable (house) vs. needs vs. wants and see how you can lower each one. I would consider Groceries a “need” but something that you can lower if needed. When we budget, we don’t have a zero balance budget (although sometimes that’s necessary), but always under budget so in case we need something we didn’t budget for, we don’t have to dip into another account.
I always feel the need to express God’s guidance and blessings and how it has helped us make the decisions we have. If this list seems overwhelming or unattainable all at once, just start with #5. Track every expense and find ways to cut expenses.
Link Ups: Thrifty Thursday