At some point in your married lives, you and your spouse will need to have a difficult conversation about whether your family can survive on just one income. It might be due to difficulties of looking after a child while both parents are working, due to health problems of one partner, or any one of a myriad of other reasons. Even if you are not married yet but you wish to be a stay-at-home mother or stay-at-home father after having children, you might be wondering how you can plan ahead and build a framework that would allow you and your partner to live comfortably on one income. There are many factors that affect whether or not your spouse can afford to quit their jobs. Luckily, there are also many measures you can put in place to allow yourself (or your spouse) to give up their jobs some time in the future.
Your Current Income vs Expenses
Whether or not you can afford to take a hit to your combined income depends on the current status of your income versus your expenses. If your combined income is being entirely spent each month down to the last rupee, you probably can’t afford to lose out on your partner’s income. These “expenses” should have a little leeway to allow for unexpected expenses or one-off costs, as well as savings, self-treats and special occasions.
If the loss of your partner’s income would create a severe discrepancy between income and expenses, you would need to take steps to create another revenue stream to balance out the loss that you would be facing. This could be done through investments, side-hustles and passive income. If your spouse is only contributing 10% or less to your combined income, and you have enough money to manage your current expenses satisfactorily each month, there is a good chance that a one-income-household can be managed.
Your Savings and Emergency Fund
Before either you or your spouse quits their job, you would need to have a sizable savings account, as well as an emergency fund that could easily last you a minimum of six months on no income at all. If you don’t have significant savings combined between you and your spouse, take steps to build up a 6 months’ stockpile before even considering the option of a one-income household. While you might think savings have no effect on your daily expenses, remember that “a dollar saved is more than a dollar earned” as you not only make interest on your savings but your income gets taxed before you get it to hand. Your savings is your fall-back in case you are unable to manage a one-income household and provides a 6 month grace period to allow your spouse to find another job that suits them. In case you don’t have sufficient savings or an emergency fund, you would need to look for alternative means of covering your monthly expenses, such as payday loans from OnCredit.lk.
Tighten Your Budget
Unless your spouse’s contribution to your combined income is next to negligible, you can expect your lifestyle to change if your spouse quits their job. Think about what expenses you are willing to cut back on and what lifestyle choices you are not willing to forego. Ideally you would need to reduce your monthly expenses by at least the value of the income loss you are about to face (e.g. if your spouse contributes Rs. 25,000 to your combined income, try to reduce your monthly expenses by at least that much). This can be done through various means such as a reduced internet package, decrease in social outings, opting for cheaper brands etc.
Practically, there is a good chance that these expenses will automatically be reduced by way of reduced work wardrobe, traveling costs, bought lunches etc. However, there might be an increase in at-home expenses such as electricity, water, internet bills as well as groceries’ costs. By tightening your budget ahead of time, you can prepare for fluctuations in your daily expenses and be ahead of the new lifestyle coming your way.
Try It Out
If you are already married and this is something that you are contemplating, trial the scenario and see.
For around 3-6 months, put your spouse’s entire paycheck into a savings account and see whether you can cover both partners’ expenses on one paycheck. This one income should not only cover your living expenses, but also allow you to contribute to your retirement fund, savings, emergency stash as well as the occasional splurge. This situation will not work if you are expecting your current lifestyle to change in the near future (e.g. if you are planning to have a baby, move houses, buy a car etc.).
When can my spouse quit their job?
While there is no perfect time for your spouse to quit their jobs, there are a few factors that suggest that maybe it makes sense to switch to a one-income household.
If you already have a child or are planning on having a child, factor in the cost of childcare against your spouse’s contribution to your combined income. Consider the cost of a live-in domestic worker, daycare costs, as well as intangible factors such as whether you wish to spend more time with your child and their upbringing. If the two of you feel that it is in the best interest of your child for one parent to stay at home, it is definitely something worth considering.
Mental Health and Stress
Every spouse wishes to be able to provide rest and reprieve for the significant other during times of need. If your spouse is undergoing severe mental stress due to the nature of their job and/or work environment, don’t shy away from considering whether or not they should quit their job. Mental health is extremely important and sacrificing your long-term psychological wellbeing should never be an acceptable trade-off.
Even though you might have all factors in place to allow your spouse to quit their job, the world has never been more unpredictable with the effects of a pandemic affecting our daily lives and an impending economic recession just around the corner. If you have any uncertainty at all regarding your financial status, perhaps it is advisable to hold on until things start to look a bit more stable. That being said, every couple’s situation is unique and there are no one-size-fits-all solutions. Consider the pros and cons carefully before coming to the correct decision in the best interest of your family.