Living on a single income can make managing daily expenses a challenging task.
Still, many people choose to survive on one salary to spend more quality time with family.
For temporary solutions, like maternity leave and to nurture preschool aged children, financial sacrifices are more practical. But how do you get ahead if you want to stay at home for the long term?
According to the Australian Bureau of Statistics (ABS), the increasing costs of essentials, such as housing, utilities and education, is pushing families deeper into debt.
To combat these harsh living costs, planning is critical. However, it takes more than mapping out the monthly budget to stretch one income to cover an entire family. Here’s how you can get ahead in 2019 as a single income family.
Make Saving a Habit
Once you have created a budget plan, it’s easier to make saving a habit.
Allocate a specific amount you want to save for short term goals, long term savings, investments and an emergency fund, and make ‘savings’ a non-negotiable part of your budget.
Many families make the mistake of prioritising bills and groceries. But by saving before you spend, you can avoid bigger money problems which typically happen with unexpected expenses.
It’s worthwhile to put 10% of your salary into a savings plan to fall back on. Make a budget and stick to it. Discipline is required, but it works!
Reduce Your Taxable Income
Paying tax can be difficult for single income families. Fortunately, there are ways to minimise your tax burden.
Families with one paycheck can benefit from salary sacrificing. This arrangement involves forfeiting part of your pre-tax pay before you receive it, which can be used to pay for other expenses instead.
Common outlays include mortgage/rent payments, a new/used car through a novated lease, insurance or child care and school fees. Salary packaging your super will also reduce your taxable income.
The fringe benefits you receive from salary packaging can save you thousands a year in tax.
Grow Your Own Produce
Food is one of the biggest expenditures for Australians.
Australian couples spend an average of $239 per week on food and drinks. Add kids to the mix, and you’re looking at between $282 and $332.
A smart way to reduce some of these costs can be to grow your own produce. Self-sufficient lifestyles can be beneficial for everyone, not just single income families. Even on a small scale, growing your own herbs, fruits and vegetables helps contribute to a healthier routine, while keeping more money in your wallet.
- Grow your favourite selection of herbs
- Get the children involved with growing veggies
- Keep chickens in the garden, if space permits. They’re great for recycling kitchen scraps and their eggs will also save you money
- Propagate your own seedlings to maximise your yield
Practice Income Inflation and Lifestyle Deflation
When your income rises, it’s tempting to upgrade your family’s lifestyle, however, this can undermine saving goals.
Lifestyle inflation can be the root of many financial problems. To combat it, practice income inflation and lifestyle deflation instead. This is the process of removing unnecessary or unwanted items from your life to cut costs and improve your way of living.
Start by working out how much money you have left over from your salary each month. By ‘minding the gap’, you can practice a more efficient way of saving and live within your means.
Don’t Use More Than One Credit Card
Credit cards are a bad debt trap if you don’t use them smartly.
If you must use them, stick to one only and ensure you maintain a good credit score. Credit cards shouldn’t be used to live outside your means. Instead, keep it for emergencies or certain payments and pay it off before the interest rate eats your savings. Make sure you set a realistic credit card limit too – and stick to it.
Think Outside the Box
Little sacrifices make a big impact when it comes to living on a single income.
Get creative in your ways to save money. Learn to DIY to encourage a more sustained lifestyle, search for other sources of income such as selling old items online or having a garage sale or opt for cheaper places to eat out instead of expensive restaurants.
What options will you use to save more in 2019? Leave your comments below!
*Please note: the above is intended as general advice only. Seek a professional for tailored financial advice and assistance.
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