On a recent Reddit thread, a commenter illuminated the power of dual-income couples living on one income, writing: “My fiancé just got unexpectedly fired today … It was a huge shock. We don’t practice every best habit … but we’re grateful we picked up doing our best to live off one income.”
The writer goes into detail on how they did it: “We just bought our house in August and insisted on going through the preapproval process off my income alone. Our lights will stay on because our bills are effectively scaled to one income as well. We held off on car payments and continued to drive our beaters because the numbers for new, used cars didn’t make sense with one income.”
While we often hear financial experts don’t as often tout advice like saving at least six months of income in an emergency fund to help you weather something like job loss, this simple advice — live on one income even when you have two –.
But the experts we spoke to say it’s powerful.
“This is an excellent method of budget hacking,” says Mitchell Hockenbury, a certified financial planner at 1440 Financial Partners in Kansas City, MO. “Wow, talk about becoming financially independent quickly.”
He sets up this scenario: “Imagine you and your spouse have full-time jobs with equitable pay and together you decide to live off only one person’s income while saving/investing the other’s,” he says. “First, you are living on half your take-home pay. Second, you are saving more into each person’s work retirement account. Third, you are saving/investing the same amount you live off (the other person’s take-home pay). In essence, you aren’t just saving 50% of your take-home pay. You are saving 60-70% accounting for pre-paying savings.”
Of course, that’s an ideal situation. While two-thirds of households with kids under 18 are now dual-income households, according to data from the Pew Research Center, even then they often struggle to pay the bills. That is often especially true for those in pricey cities, and “for young couples with children and for parents who have kids in college,” says Kimberly Foss, founder of Empyrion Wealth Management in Roseville, Calif.
Still, it’s worth a try: “Maybe you can only do it with the person whose income is the highest and save the lower income,” says Hockenbury. “Regardless, this is a good method of planning and saving. You help yourself build your nest egg and emergency fund quickly, and you are in a better financial position if you lose a job or decide you’d like to take a lower-paying, but more fulfilling job.”
It’s important to remember if you have high-interest debt like credit card debt, you’ll often want to pay that down before putting money into savings because the money you’d earn on savings typically pales in comparison to what you’re paying on that credit card debt, experts say. And even if you can’t save the entirety of a second income, one thing is clear: “It is vital to create and maintain some margin that will enable you to survive the unexpected—which happens to all of us, no matter our income level or demographic,” Foss adds.