Experts reveal how to live off one income in a two-income household

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According to the Federal Reserve the average retirement savings for a person between 45 and 54 years old is $250,000. For someone between 55 and 64, it’s closer to $400,000. What is your bank account’s relationship to these numbers?

If you know the answer, “not great,” there’s still time to start racking up major retirement savings, especially if you’re in a two-income household. Financial planners suggest that one income is sufficient to support your lifestyle and the remainder be used for savings or investments.

It might sound like a nightmare to pair down your lifestyle to bare bones, but after speaking to several experts, it’s actually a pretty feasible plan. The consensus is unanimous among CPAs, financial planners, and debt relief lawyers.

Not only is paring two-income households down to one a highly effective way to boost retirement savings—particularly in midlife and beyond—it’s also surprisingly possible. Here’s how to get started.

1. Plan and delegate

“The basic idea is that, even in a dual-income household, you can live on one income while keeping the other to pay off your high-interest credit cards, build an emergency fund, invest it, or keep it as savings,”Lyle Solomon explained, “a Finance attorneyAuburn, California “Keep the higher income to cover all the expenses for your living, and keep aside the lower paycheck for your financial goal.”

You should consider how much income you and your partner will need to live and save. This will help you establish a baseline for the next steps.

2. Take a look at your most difficult problems

Jason Ramage, a financial advisorCincinnati, Ohio, highlighted the importance of anticipating obstacles based on income levels. “For higher earners, the main roadblock will be lifestyle. That’s not just spouses and partners—expectations for gifts to family and how you spend time with friends may need to be communicated.”

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3. Start to Split It Up

Once you’ve assessed where each income will go (and the obstacles you might face as a result), you can start divvying up funds. “A good starting point is looking into the 50/30/20 rule,”Julien Brault CEO of HardbaconCanadian finance management app.

“Take the one income, allocate 50% to basic needs, 20% to savings and debt repayment, and 30% to pleasure. Now, this may seem like a really tight budget at first, especially if there are other dependents, such as children. However, a couple will have some wiggle room with the 20% because they already have 100% of the additional income going into savings.”

The graph shows how Brault suggests that couples divide their finances using the 50/30/20 principle.

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4. Keep It Open

Brault suggests that the reserve income should be as transparent and easily accessible as possible. Both partners should have access to the accounts “so that it’s not one person spending all their money, while the other accumulates a chunky bank account. Life can be unpredictable, and this arrangement should remain fair for both parties.”

“Consider the second saved income as an agreed-upon amount to save amongst one shared separate account,” Brault continues. “Then, divide the 50/30/20 spending among the personal accounts. For example, if one person pays the bills, the other buys groceries and gifts. This will help avoid strife and keep everyone happy in the long run.”

5. Take it slow and keep at it.

Nearly all financial experts I spoke with stressed the importance of slowly adjusting to this lifestyle change. “A cold-turkey approach when it comes to finances will never work effectively,”Paul Sundin warns CPA. “Start the process slowly, and have a plan in place.”

“Staying committed can be challenging,”Solomon is also included. “It’s natural to feel burdened when you suddenly switch to living with one income. To make this more bearable, I recommend following it for a minimum of six to eight months, even when you want to give up. By the end, when they see the result, it becomes more of a habit and interest.”

6. Keep in mind the many benefits

It can be difficult to switch from two incomes to one. Whether you need extra convincing or are experiencing some one-income woes, it’s important to continually remind yourself of this lifestyle’s benefits.

“Added flexibility, starting to feel financially free long before you reach any target savings number, possibly opening doors to a move, career change, or starting a business that felt too risky when you were spending both incomes,”Ramage stated that there are many benefits to this approach.

Although saving for retirement can seem overwhelming, there are some ways you can make it simpler. It is difficult to reduce your income to one. However, it is possible to save a lot of money if one income is enough.

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