How to Manage Money in a One-Income Relationship

Couples manage money differently. Some couples pool their income, others share just expenses, and some keep their accounts completely separate. But what about couples in a single-income relationship? It can be difficult to stay on the same page financially when only one partner is earning all or most of the money. Whether one of you is a stay-at-home parent or just temporarily out of work, here are six tips for managing a one-income relationship.

1. Be Transparent

Communicate with your partner. If one person has debt, both partners should know about it because it affects both of you. Couples who aren’t transparent with their financials or money goals may be worse off in the long run.

A Policygenius survey revealed that one in five people keep their money apart from their partners. Twenty percent of people who manage money separately from their partners are planning to break up due to their partner’s money issues. Keeping your financial troubles a secret can cause big problems down the road. The easiest way to avoid these problems is by being transparent about your money.

Couples in one-income relationships should also communicate any fears or insecurities upfront. Partners who aren’t producing a regular income may feel guilt or shame. Conversely, the partner who is producing income may feel as if they’re doing more for the relationship. Relieve these feelings by dividing your financial responsibilities. For example, the partner who isn’t earning an income can handle more of the bills or retirement planning.

2. Make a Joint Budget

The easiest way to keep track of your money is to make a budget. A budget is a great tool for tracking how much you’re spending and saving. It’s especially important when you’re living off a single income. Budgets also give both partners a better sense of how to handle their money. Consider creating joint accounts to more easily manage certain types of spending.

Having one income probably means cutting back on overall spending. Again, a budget shows where money is going and is a useful tool for deciding where to cut back.

3. Build an Emergency Fund

A recent survey revealed 78% of U.S. workers live paycheck to paycheck, including 10% of workers with incomes above $100,000. If you’re living off a single income, even if just for a bit, living paycheck to paycheck is a real possibility. That’s where an emergency fund is crucial.

An emergency fund is money that you have set aside and will be there in unforeseen circumstances. These types of circumstances include buying a new tire for your car, getting the toilet fixed, or paying for health care when you unexpectedly get sick. The size of your emergency fund depends on your specific situation and it may change over time. If you don’t have any dependents or major debts, having one to three months’ worth of income is a good range for an emergency fund. If you have a mortgage and kids, your fund should be larger. Make sure you always rebuild the emergency fund if you draw from it.

4. Get Life Insurance

It’s vital to have financial protection in the event something happens to the income-earning partner. That’s where life insurance comes in. It’s a safety blanket that will cover your partner’s stream of income if the unexpected happens. It’s essential when shopping for insurance to get the right size policy. One of the easiest ways is to compare life insurance quotes based on your specifics.

5. Pay Down Your Debts

Forty-two percent of people feel stress because of their debt according to a study by Northwestern Mutual. This isn’t very surprising when the average personal debt excluding mortgages is $38,000. Whether you have student loans, credit card debt, or medical debt, it’s important to pay it down as quickly as possible. Once you aren’t spending money each month just to pay off debt, you can actually begin to build some savings.

6. Prioritize Retirement

Most people don’t save enough for retirement. If you have only one income, it’s increasingly important to prioritize retirement savings to make sure you and your partner can maintain your lifestyle through the golden years. Even if you don’t have a lot, start saving now. Saving (and investing) a little earlier on will add up to more than if you start later.

Description: A couple managing their finances together at home.

Conclusion

Managing money in a one-income relationship requires transparency, budgeting, building an emergency fund, securing life insurance, paying down debts, and prioritizing retirement savings. By following these tips, couples can navigate financial challenges and maintain a healthy financial relationship.