One day, you're a two-income family. The next, one of those incomes is gone. Or you are planning on making a financial change in the future. What do you do? (For related reading, also take a look at 3 Alternative Budgeting Styles: Which One Suits You?)

IN PICTURES: 5 "New" Rules For Safe Investing

Whether one of you chooses to leave your job or the reason for departure is out of your control, having a plan to deal with sudden loss of income can be the key to financial - and emotional - survival. Here are some basic steps to cope with the change.

Take a Good Hard Look at Spending
Do you really need the new car every year and the expensive lease payment that comes with it? Or can you "make do" with a more economical model without all the bells and whistles? In addition to saving on monthly payments, making a change might also reduce your auto insurance premiums. It's worth checking into. How about entertaining? Having dinner out two or three times a week at a local restaurant can run a couple, on average, at least $50 a shot - more with drinks and generous gratuity. Even grabbing coffee and a snack on the run can add up, especially if your craving for chocolate caramel lattes becomes part of your everyday routine. (For more on tipping etiquette, see When To Tip? And How Much?)

Likewise, examine your shopping habits, for clothing, groceries, household items etc. Making a list of what's necessary and what's not might help you rethink how and why you spend your money. Remember: While cutting down on a few indulgences won't replace the loss of a paycheck, it could be the start of gaining more self-control when it comes to your spending habits.

The Bare Necessities
Shifting from two incomes to one doesn't necessarily mean ceasing and desisting all spending, but it does require careful thought and planning - and creating a budget. Then you can get down to the business of cutting back. The first items that come to mind when doing one's budget are necessities such as housing and groceries. Consider refinancing your mortgage, if you're able to secure a low enough rate to make it worth your while. This may cost a little up front in fees, but can save you a bundle in the long run.

Take another look at your weekly grocery shopping list. Are you paying attention to weekly sales and using coupons? Buying in bulk when available? Don't forget about other equally important expenses, like health coverage and other insurances such as life, fire and homeowners or rental policies.

Re-evaluate monthly expenses, such as phone and cable costs, subscriptions and organization dues and credit card balances. Can you trim a little here and there, or eliminate entirely? Sometimes all it takes is a call to the company to renegotiate your credit card interest rate or cable contract.

IN PICTURES: 7 Forehead-Slapping Stock Blunders

Forget the Crash Diet
Okay, so you may have to forego that three-week cruise to the exotic ports of call. But that doesn't mean you have to stay home, either. Lots of families and couples enjoy affordable vacations, thanks to careful planning. Look for off-season rates or last-minute deals, or opt for day trips where you can easily take mass transportation.

Don't feel like cooking? Order take out. Want to see a movie? Try a matinée, which is usually cheaper (and can make for a nice break in the day). Denying yourself of all spending is like crash dieting - you may lose the weight quickly, but you haven't lost the craving or learned how to eat sensibly enough to keep the weight off. It's no different with finances. Avoid withdrawal symptoms by easing away slowly, and thus, learning to live leaner at the same time.

Create an Emergency Reserve
Disasters happen, and they don't care that you now have one income instead of two. So you have to stay prepared. Easy? No way. Possible? Of course.

If you made regular contributions, say, to your IRA or piggy bank fund, figure those into your budget plan. You may have to lessen the amount you're saving, but try to stash away something as often as possible. After you've reworked your budget and expenses, if you can live with $20 a week less for one year, you will have saved about $1,000. That can pay for an unexpected emergency like a minor furnace repair or some dental work.

And if you're fortunate enough to have no such emergency, you'll have some extra cash for something "fun" or, at the very least, an excellent start towards a new frugal you.

The Bottom Line
Having to go from two incomes to one is no task for the weak-willed. But it can be done, and you will be surprised how resilient you can be. Don't worry about keeping up with the Joneses. Your situation is unique to you, and if that means having to tell your friends you can't do dinner or a show, then so be it. If they're true friends, they'll understand.Stay on the same page as your partner. Serious budgeting and fiscal revamping only works when the two of you agree, or at least agree to compromise.

Remember, a financial change may only be temporary. If you can manage until your situation changes, bravo. If the change is decidedly permanent, you will have a head start. (For additional reading, also check out The Beauty Of Budgeting.)

Related Articles
  1. Economics

    Is a Recession Coming?

    In the space of a week, the VIX Index, a measure of market volatility, spiked from 13, suggesting extreme complacency, to over 50, evidencing total panic.
  2. Mutual Funds & ETFs

    4 Mutual Funds to Consider If Interest Rates Rise

    Learn what mutual funds will perform best if interest rates rise. Interest rates can rise due to inflation or to an improving economy.
  3. Economics

    Understanding Switching Costs

    Consumers incur switching costs when they receive a monetary or other type of penalty for changing a supplier, brand or product.
  4. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  5. Savings

    6 Ways to Save Money on Back-to-School Stuff

    Those school-supply lists just keep getting longer each year. Here's how to shop smart.
  6. Economics

    Explaining Market Penetration

    Market penetration is the measure of how much a good or service is being used within a total potential market.
  7. Economics

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  8. Stock Analysis

    The Best Stocks to Buy for Less than $10 before Year End

    Learn about the best stocks to buy under $10. These stocks are speculative but have considerable upside given their valuation and market conditions.
  9. Investing Basics

    10 Companies That Yuppies Love

    Learn about 10 companies loved by the modern Yuppie, including how this demographic's impressive buying power has boosted these companies' earnings.
  10. Savings

    6 Ways to Save Money on College Supplies

    Tuition and room and board are big expenses, yes, but the cost of textbooks and supplies can add up, too, unless you strategize.
RELATED TERMS
  1. Duty Free

    Goods that international travelers can purchase without paying ...
  2. Negative Option Deals

    A dubious business practice that involves supplying a typically ...
  3. G.19 Report

    A monthly statistical report from the U.S. Federal Reserve that ...
  4. Drip Pricing

    A pricing technique in which only part of a product or service’s ...
  5. Behavioral Modeling

    Using available and relevant consumer and business spending data ...
  6. Zero Percent

    A promotional rate of interest used to entice consumers, often ...
RELATED FAQS
  1. Is Japan an emerging market economy?

    Japan is not an emerging market economy. Emerging market economies are characterized by low per capita incomes, poor infrastructure ... Read Full Answer >>
  2. Are Social Security payments included in the US GDP calculation?

    Social Security payments are not included in the U.S. definition of the gross domestic product (GDP). Transfer Payments For ... Read Full Answer >>
  3. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  4. How do changes in interest rates affect the spending habits in the economy?

    Changes in interest rates can have different effects on consumer spending habits depending on a number of factors, including ... Read Full Answer >>
  5. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  6. How much does seasonality affect the net sales figures of companies, such as retailers?

    Seasonality affects both sales and net sales figures of companies in different ways. For some companies, seasonality has ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!