5 Reasons Dual-Income Families Should Live Off One and Bank the Second

by Jessica Sommerfield · 12 comments

one income
A financial survey from 2015 showed that 46% of U.S. households are dual-income. The key reason this is becoming the norm is obvious: we think we ‘need’ more money. With a higher cost of living, a questionable economy, and an uncertain stock market, it’s no wonder many couples believe two full-time incomes are necessary these days.

If we took a closer look at an average family’s income, bills, and spending habits, we’d frequently find that the way these incomes are being used isn’t necessary or financially advantageous. Instead of increasing our financial security, additional income often becomes an excuse to increase our standard of living – a sneaky phenomenon called lifestyle inflation. Americans are particularly bad at saving money — about 25% of us don’t have any savings at all, and roughly half of us haven’t saved anything for retirement.

You might think you can’t afford to if you’re living off two incomes and still can’t seem to save money. You would be wrong in most cases, though. Many families are finding new financial freedom by constraining their budget to just one of their incomes. The transition may be hard, but the financial pay-off can be tremendous. Here are five reasons dual-income families should live off one income and ‘bank’ the second.

#1: It’s an unparalleled savings opportunity.

If you can manage to pay all your bills and household expenses with one income, the second can be the key to achieving previously elusive savings goals: building an emergency fund, saving for a down payment on a home, maxing out 401K or IRA contributions, investing in stocks/bonds/CDs or money market funds, setting aside money in a 529 account for education expenses, saving for a big vacation, and much, much more. Even if you can only afford to do so for one year, it could forever improve your financial future. For instance, making the maximum 401K contribution of $18,000 at the age of 30 could mean having over $266,000 by the time you reach 65.

#2: It’s a way to channel funds into faster debt repayment.

Some people don’t think they can save money because they’re overwhelmed with debt, but a second income can be used to overcome this hurdle, as well. Dedicating the second income to debt repayment will relieve the burden that much faster, trimming monthly bills and money wasted on interest.

#3: Having a financial cushion relieves stress due to emergencies and unexpected expenses.

Living paycheck to paycheck or just having a tight budget can be stressful when someone gets sick, the car breaks down, or a major appliance dies. Having a savings cushion created by banking one of your monthly incomes means being able to roll with the punches with fewer ‘black eyes’ and sleepless nights. After all, having money doesn’t mean you have to spend it.

#4: It means greater security through job losses and smoother lifestyle transitions.

Even in two household incomes, many couples would experience an instant financial crisis if one of them got laid off. Things might be a little tight even if your household budget is based off of just one income, but you’ll still be able to pay your bills with fewer adjustments. Additionally, if one parent decides to stay at home after having a child, the loss in income is much easier to accommodate. Living as if you only have one income leads to greater security and easier adjustments to actual income fluctuations.

#5: Monthly budgeting gets easier.

With only one income stream to allocate for household expenses – and, if you’re using the second income for savings, fewer budget categories – budgeting gets way easier. A simpler budget means being able to quickly track and fine-tune your income and expenditures, leading to even greater financial health.

Spending just one household income and using the second to achieve financial goals isn’t easy, and it’s not for everyone at every stage of life. It is something to consider though, and there are plenty of success stories to prove it can be done.

Do you think this strategy might be feasible for you?

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{ read the comments below or add one }

Jessica Sommerfield July 15, 2016 at 12:05 pm

You’re right, it would be more difficult in a major city with a higher cost housing, in particular. However, some people who live in Seattle choose to offset the higher housing expense by using public transportation and walking/bicycling to work and around the city. This could eliminate the need for a car payment, car insurance, fuel expenses, upkeep, etc. That alone is a huge budget category that, if eliminated, could make it feasible to live off one income and bank the second. I admit that expensive housing is a pain. My husband and I are looking into purchasing a townhouse or condo in the next few years because we’d probably be able to lower our monthly housing expense by at least a few hundred dollars. Basically, I think that if you want to make it happen, you can make it happen regardless of where you live — each situation (high expenses, low salaries, high-expense area) comes with its own challenges.

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felipe July 15, 2016 at 10:40 am

do you realize how hard it is to live off one income between two people in major cities, this is really unrealistic to do…unlike you live like a savage…..

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David Ning July 15, 2016 at 5:59 pm

It’s not easy or common, that’s for sure. But success is not common either. And if you keep looking for ways to save, you may find, like many people, that saving a bunch is actually not as bad as you think.

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Hayley July 14, 2016 at 4:22 pm

I always enjoy the articles on Money Ning! As a military spouse, I have unfortunately experienced more time being “between jobs” than I ever anticipated. I am grateful my family budget is such that we can live off one income and still save money. Then the times when I am working, we save even more. It makes life a lot less stressful to know that I can wait for the “right” job that will help my career after my husband retires, instead of taking the first thing that comes along.

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Latoya @ Femme Frugality July 8, 2016 at 1:45 pm

I never considered the aspect of budgeting being simpler by living on one income, but that is true and even more appealing. I like things simple.

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David Ning July 8, 2016 at 5:41 pm

Simple is key. With fewer moving parts, it’s also much easier to improve too. There are really endless benefits!

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Brian Lund July 8, 2016 at 1:04 pm

This is a powerful strategy. If implemented, I’m sure it could speed up the process to financial independence by 50% at least.

Awesome post Jessica. Thanks!

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David Ning July 8, 2016 at 5:40 pm

The numbers are impressive if you can save half your income. In fact, you can speed it up even more than 50% because you are not only saving that money but you also end up spending just half. Depending on future market returns, you could be looking at a difference of never able to retire versus being able to retire in 15 years.

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Jessica Sommerfield July 8, 2016 at 11:00 am

Your additional tips are excellent! It’s true you don’t have to be married to utilize this strategy. It sounds like you’ve been wise with the use of your income. It’s basically a matter of making your money work for you by living within a modest budget and saving/investing/accomplishing other financial goals with the rest. In most cases, our financial issues aren’t a matter of how much money we make, but how we’re using it.

Thanks for sharing!

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David Ning July 8, 2016 at 5:37 pm

You are right Jessica. What you said bares repeating – “It’s not how much money we make but how we use it!”

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freebird July 8, 2016 at 7:40 am

I never married so what you describe may not be feasible for me, but I would still claim to have a dual income– I work full time and so does my investment portfolio. In addition to the five benefits you list, I’d add two more:

#6 if you become accustomed to low spending and a high savings rate, not only does your portfolio grow faster, but your lower expenses are easier for your portfolio to cover by passive income. So you get the double whammy of a higher numerator and lower denominator, meaning you’ll reach financial independence (i.e. no longer needing the paycheck part) much sooner.

#7 once you reach financial independence, not only can you handle financial setbacks, you also gain the flexibility to pursue high risk/high reward opportunities. When I grew up a common success story involved a marriage between someone with a secure steady job that covered basic living expenses and someone who invested time or money in a risky venture that paid off big time. Wouldn’t it be a shame if your middle-aged self got a call from a former colleague offering you a C-level job in a promising young startup, but because of your steep financial commitments you could not afford to take that chance? In other words having a thick cushion and low expenses is great for offense as well as defense.

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David Ning July 8, 2016 at 5:37 pm

Your situation (main income + investment portfolio) is basically how I grow my pot right now. #7 is so true for me, because I would have never been able to jump off the corporate bandwagon and give entrepreneurship a go if I had huge financial commitment.

I thank the lucky stars every time I drive by a house I almost bought in 2007. Not only did that house depreciate in value for the next few years, but the mortgage payment most likely meant that I would still be stuck at my old job. Without that mortgage, I was able to work on MoneyNing.com full time and that completely change my family’s finances.

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