With the extravagant lifestyles we strive toward, it has become nearly impossible for us to fathom surviving on a single income. For those of us who are accustomed to living with multiple income streams, this is a scary thought. It is, however, quite possible to survive in the current economic climate on a single income. It is also very possible to live comfortably on a single income. One may also find it freeing to economize and live prudently. Assessing avenues for maximizing your income is the key to living comfortably on a single income. Moreover, we often find that the process of cutting back may uncover a healthier lifestyle, giving us insight into healthier nutrition choices, more family time and better wellness choices. In this article we shall see How to live frugally on one income?
How to live frugally on one income?
To live frugally on one income does not signal a life devoid of comfort. With the right balance, any situation can be made enjoyable. Economical lifestyles can be achieved by cutting back on, not all, but some expenses. There are various ways to achieve this without foregoing all items and activities that one enjoys. This involves a combination of improved budgeting methods and economical lifestyle choices.
A single income, although not as copious as two, can be utilized optimally to provide for you and your family. For us, humans, who are creatures of comfort, making economical choices, may take some getting used to. Living frugally, however, will prove a better way of life. With practice, the aspects involved in living within the means of a single income will become second nature and leave you feeling free to spend time and energy on the most important things.
Drawing up a budget
An integral part of any lifestyle is obtaining a clear picture of the monthly income and expenditure. How much you have each month and how you spend this income is vital information in designing an efficient financial plan. Although essential, this is an exercise that few undertake. As a result, statistics show more people drowning in debt than those living comfortably. Drawing up a simple list of your monthly income and expenditure will give you a bird’s eye view of your finances. This will enable you to see clearly which parts of your monthly spending are necessary and which are unnecessary. From this information, you can take control of your finances and start to live more economically.
Resources for drawing up a budget
A budget is simply a list of your income and expenditure and the difference between these totals. This can be accomplished using data processing software or simply, good, old fashioned stationery and a calculator. One can have fun with this exercise, sprucing up the budgeting document and making it as simple to read as possible. A budget should be completed in a document that is easily accessible as this should not be a once-off undertaking but rather a regular one. A budget should be assessed and updated regularly to accommodate for any fluctuations in income and expenses.
List of income and expenses
A budget comprises a list of income streams in one column and a list of expenditure in another. The totals of these columns are subtracted from each other. Expenses comprise fixed and variable expenses. This exercise should be undertaken with a copy of one’s monthly bank statement at hand. Using the bank statement every amount spent out of the income should be listed. This includes Starbuck’s coffees and McDonald’s burgers.
If fixed expenses are not automatically deducted from the income, these should be deducted before listing in the income column to give the net income. The net income is the money that one is at liberty to spend for the month.
Fixed expenses should be listed under the expenditure column. Fixed expenses comprise those which one is liable for each month, usually at a fixed rate. Examples of fixed expenses are mortgages, car repayments and utilities.
Variable expenses should be listed under the expenditure column. These expenses comprise those which one spends on an ad-hoc basis, usually of varying amounts each month. Examples of these are grocery expenses, social expenses, and clothing expenses
Once completed, a budget will show clearly whether one has been living beyond their means. Initially, it can be evident that this is the case but taking the steps to streamline one’s budget will yield numerous benefits and move one away from living beyond their means.
Having a clear picture of what one’s budget looks like, one can see a clear path toward pruning excessive expenditure. Cutting back on monthly expenditure is often received with dread. This is unnecessary as budgeting is an interesting exercise with rewarding results.
Curbing fixed expenses
Often overlooked as unalterable, fixed expenses are usually omitted from the expense refining exercise. Although curbing fixed expenses may not be immediate, these can be reduced long term.
A mortgage is one of the biggest expenses incurred monthly. Although a fixed rate is agreed upon with the mortgage provider, paying small additional amounts into a mortgage each month, reduces the term of repayment. The benefit of this may not be enjoyed on a month-to-month basis as this may not reduce the monthly repayment value but taking this action will reduce the interest due on the mortgage. In the long term, this is extra cash in one’s savings.
- Paying small additional amounts into one’s vehicle finance account reduces the term of the repayment, which reduces the overall interest paid in the long term.
- Eliminating the debt of vehicle finance will alleviate a large monthly expense. This can be done in two ways:
- If the settlement amount on the vehicle is minimal, this can be paid off freeing up a large amount of cash each month.
- Selling a vehicle, which is on a vehicle finance plan, paying off the debt, and purchasing a vehicle that you can afford to pay cash for, will eliminate this monthly expense.
Those utilities which are dependent on usage can be reduced by cutting down the amount we use. Switching off lights and appliances as well as geysers, when they are not in use, reduces utility costs.
Sifting through all fixed expenses and undertaking the above cutting back exercise for each of them can help significantly reduce monthly fixed expenses as well as yield long-term benefits.
Curbing variable expenses
This portion of the budget offers opportunities for significant savings. Nominal charges on one’s bank statement during the month are often surprising and reflect various areas where cutbacks can be made without sacrificing comfort.
The key to living comfortably on a single income is to eliminate debt. Debt is the path to the unraveling of our financial security. Reducing debt is not as daunting as one would imagine. The simplest way to do it is to work in reverse. Start with the smallest debt and focus on paying that off. Sacrifice in other areas to contribute more toward paying off this debt. This eliminates one of the expenses for the month and frees up that amount of money. Take that amount and pay it into the next debt account as an extra payment until this debt account is paid up. This eliminates another expense for the month and frees up more money. Continue this exercise for each debt account in succession until all are paid off.
Example: Take a credit card or clothing account. Work on paying off the smallest one first. Once that is paid off, move onto the next. Work on one at a time until eventually all are paid off.
It is not possible to stop payment on any of the debt accounts while undergoing this exercise but sacrificing in other spending areas such as personal spending will help free up money for the first debt account. Thereafter more money will be freed and there will no longer be a need to sacrifice comforts.
Assessing nominal expenditure
One of the most effective ways to live comfortably on a single income is to assess monthly expenditure on lifestyle indulgences. Significant savings can be achieved in this area. Variable expenses can be grouped into recurring variable expenses and once-off variable expenses.
- Recurring variable expenses are those expenses that are paid each month but not at a fixed rate or are not a necessity. These would include expenses such as telephone bills and grocery bills.
- Once-off variable expenses are those which are incurred on an irregular basis and not necessarily every month. These would include take-out expenses, clothing expenses, and social expenses.
Reducing nominal expenditure
Recurring variable expenses
Analysis of these recurring costs will reveal opportunities for cutting back. This does not have to mean cutting out these costs but some of them can be reduced to allow more financial room in the budget.
- Telephone costs can be reduced by reducing the number of social calls per month and/or the lengths of calls. Discussions with family and friends can be had to reduce the amount of talk time per month.
- Various low-cost calls and data options are available such as off-peak periods where call rates are lower as well as various online group chats and video apps. Strategic communication planning can significantly reduce this cost each month.
Take out and dining expenses
These expenses are often not tracked and left uncontrolled. Analysis of one’s bank statements will show that this adds significantly monthly expenses. This expense does not have to be cut out completely but reducing the number of times these are incurred per month can help reduce monthly expenses.
Grocery expenses cannot be cut out and have to recur each month. There are, however, ways to reduce this cost, if not every month, then for some months.
Reducing purchases of luxury items
Although there isn’t much one can do to eliminate the cost of the essentials, there are various luxury items that are purchased each month such as junk food, branded cosmetics, and expensive perfumes. These costs can be reduced by reducing how often these items are purchased. These items are not a necessity each month and can be purchased once every few months or annually. Cutting back on these items could prove very beneficial to financial health as well as personal health.
Buying in bulk
It is common knowledge that bulk quantities offer some savings in costs. Buying in bulk can reduce monthly grocery costs. These items last through the month and negate the need to buy such items every week. Some items can be stretched over two months.
Travels costs also contribute significantly to monthly expenses. This can be reduced by limiting the number of trips made thereby reducing fuel costs. Carpooling is another way to cut costs in this area.
Once-off variable expenses
Analysis of once-off costs can reveal areas for a significant reduction in monthly expenditure.
Clothing should not be purchased every month and certainly not every week. This is another area that contributes significantly to monthly expenditure and one, which offers opportunities for expense reduction. Reducing shopping frequency per month will free up money for spending in other areas of the budget. Clothing accounts should be paid off using the debt reduction method above and then canceled. If it cannot be bought in cash, it is not within the budget. Save up until it can be paid for in cash.
Cutting costs often means lifestyle changes, which is not a bad thing. Indulgent lifestyles are sometimes not the healthiest and often direct focus away from important things such as family time. Cutting costs somehow forces one to sharpen focus on the things that matter, such as healthier eating habits, lifestyle choices, and the focal points of one’s attention.
Opting for a reduced frequency of eating take-out is a healthy lifestyle choice. Eating more home-cooked meals enhances healthy eating patterns.
Cutting out visits to the gym is not equivalent to not exercising. Home gym equipment is a once-off cost and lasts a lifetime. Home exercise videos are a great way to work out at home for free. This offers the chance to involve the whole family and make a fun activity out of it. This will encourage the children to get in their exercise each day as well as increase family fun time.
Humans form a social society and as a result, tend to spend a lot on socializing. Upon analysis of the monthly expenditure in this area, various opportunities for cutting back can be found. Going out with friends fewer times a month or year can cut expenses significantly. Another way of cutting costs in this area is choosing different locations for socializing.
- Socializing does not have to mean fine dining in fancy restaurants every week. These outings can be cut down to once a month or once every quarter.
- Weekly socializing can take the form of a day at the park or a day at the seaside. These are free activities that can significantly reduce monthly social expenses. Cheaper venue options such as zoos and funfairs are also a great way to enjoy socializing without blowing your budget. Inviting friends over for a barbeque is another way of cutting costs in this area.
Extra tuition at home
If possible, taking over extra tuition for the kids instead of sending them to an external tutor may also present an opportunity for cutting costs. There are various study guides and online video tutorials that can help provide this for the kids in addition to their regular school classes. This may also equip you with a new skill set.
Other expense reduction ideas
- Downsizing one’s home and the vehicle may be a great way to reduce expenses. Swopping a large house for a smaller one or an apartment presents an opportunity for saving on expenses. For the elderly, retirement villages present a nice way for downsizing in this area. Swopping an expensive car for a cheaper one presents another opportunity for saving. For some, this may mean being able to purchase the smaller home or vehicle in cash. This will present a huge saving in monthly expenditure and alleviate some of the largest of one’s expenses.
- Family planning is another way to better plan for economic living. If kids are not in the picture as yet, it is always a good idea to plan financially for kids before having them. Drawing up a hypothetical budget that includes the costs that will be incurred for the kids will enable one to plan accordingly. The number of kids that can be afforded can be seen from this exercise. Family planning consultants can be approached to formulate a holistic picture for optimal family planning.
Living economically does not mean giving up a comfortable lifestyle. It just means tweaking expenses strategically to enjoy more financial freedom. This can also mean healthier lifestyle choices and time freedom. One may find that living economically leads to a happier and free individual. The ideas outlined above are but a few. There are various ways to cut back and still enjoy the things that matter. There are many roads that lead to the same destination. Just because a change occurs does not mean giving up the life one wants to live. One may even find new and improved ways of accomplishing these things.
Frequently Asked Questions
- Who should economize?
Economizing is not only for those who have a single income. It is common that the more we earn the more we spend. This negates increases in our income because we increase our expenses further. This disables our ability to deposit more into our savings. If we decrease our expenses and increase our savings we are better off. If we can decrease our expenses while increasing our income, we have won the financial game. Therefore economizing should be everyone’s monthly exercise.
- Does a single income equal a difficult life?
It is very possible to live a comfortable life on a single income. It just takes a bit of tweaking in our budgets and we’re good to go. Budgeting and cutting back are not scary. If everyone could live as if they were living with one income, we would have a population that experiences more financial freedom. We buy ourselves into a financial prison. If we can learn to live frugally, the benefits are exponential. Living on a single income will give you a fresh perspective and enable you to live freely.
- Will I get used to living on a single income if I’ve never had to before?
Living on a single income may be a change but it is not an uncomfortable one. It may, in fact, be an improved way of living. It will enable you to make better saving choices as well as lifestyle choices. You may need to undertake a few adjustments but these are often not major adjustments and you may even find that you feel freer. Letting go of financial commitments is very freeing. You will certainly get used to living on a single income.
- How can I avoid depriving my kids of important things if we have to live on a single income?
It is not necessary to cut back on the essential provisions for the kids. You can provide adequately for your kids on a single income. You will be able to provide education, food, and adventure. There is no reason for your kids to be deprived of their basic needs. There are various ways that you can save on expenses involving the kids without depriving them of their basic needs.
- You can cut back on extra tuition by providing this yourself or acquiring it from a family member or friend.
- You can cut back on unnecessary stationery items.