Living on One Income (Part One): Setting a Budget

Living on one income can mean it’s time to cut back - or it can mean the opportunity to slice your spending in half by making a few clever budget changes.

To start, it's essential to look at your cash flow. How much money is coming in and how much money is going out. 

The first part should be easy. Simply list every penny of income you receive on a regular basis every month. 

Then comes the slightly harder part of listing everything that you are committed to spending on every month. This includes your mortgage, car payments, loans, utility bills such as electricity, cable and water. Make a full list of everything that you absolutely must pay for every month. 

You should add a realistic amount for food and other essentials such as diapers for your little ones or any other costs that you have to pay on a regular basis. These are your essential monthly costs. 

Now subtract your monthly costs from your monthly income. The difference between these two amounts is your disposable cash - or how much you have to spend on everything else. 

This amount might actually be negative and this is actually more often the situation for many families where you suddenly realize you can’t afford your living.

But don’t worry, because there are lots of things you can do to reduce the costs. The first place to start is on the list of items that you made for you essential monthly costs. 

We all usually have a long list of essential monthly costs so if you can reduce each one by ten dollars here and twenty dollars there and it will eventually all add up to make a significant difference. 

Read Living on One Income, Part 2: How to Save Money and Make it Work >