Header
Header
Skip to main content Skip to search
  • Open an Account
  • Help Center
  • Sign On
  • Careers
  • Find Us
  • About Us
Primary
VideoDetail
h1

Making the Switch to a Single Salary

Share current LOB: PersonalBanking

[host] Never has the concept of the American family been as wide-ranging as it is now, and one significant cultural shift taking place is the trend toward dual-income families.

 

The number of dual-income households increased 31 percent between 1996 and 2006. Now, 59 percent of married couples with children are in homes where both parents work. Yet, the urge to raise and spend more time with kids is still a draw for many. The number of stay-at-home moms increased from 23 percent in 1999 to 29 percent in 2012. Part of that change is due to a tough economy and a shift in demographics.

 

Peter Bowman, a litigation attorney for Pavano & van der Werff in Windsor, Conn., says he and his family are working to become a single-income household. They’re doing so gradually. For more than two years, Bowman’s wife has transitioned from being a full-time nurse to working 25 hours a week. She now works around 12 hours a week—and some weeks, not at all.

 

[Peter Bowman] My wife’s ability to fully transition out of full-time work was beneficial to us, because we were able to do this over a period of time as opposed to one fell swoop.

 

[host] This period served a dual purpose: It allowed his family to slowly adjust to a lower income, and it gave Bowman time to advance his career—and grow his personal income. According to Bowman, this approach made the process more manageable.

 

Likewise, Rob Baugher's family went about the transition slowly. They tested the waters by setting aside his wife's entire income for six months. They committed to not spending her salary at all during that time.

 

[Rob Baugher] We really wanted to experiment to see if we could do that.

 

[host] For the six-month test period, Baugher and his wife calculated the net loss of shifting to one income. That meant subtracting the lost income, but also subtracting the work-related expenses they’d no longer have to pay, such as travel expenses, buying business attire, getting coffee and spending money on work parties. During this trial period, Baugher’s family had an epiphany:

 

[Rob Baugher] It didn’t affect our overall lifestyle at all, which was really nice. It was very surprising.

 

[host] According to Bowman, you need to start with a budget. Then, ask yourselves: Are we realistically able to do this?

 

[Peter Bowman] They have some good online tools to set a budget. But I think it’s also about sitting down and communicating spouse to spouse about what financial expenditures you’re going to have in the future, what are we going to have on a regular basis, are there any ways to reduce those expenses. When you sit down and do that, this might be the perfect time to do it, or you may say, “I won’t be able to do it until one year or two years from now.”

 

[host] By cutting back on what Bowman calls the classic expenses—bringing his own lunch instead of going out to eat, more date nights at home than going out, not taking extravagant vacations—the single income became not just doable, but completely manageable.

 

Another focal point for both families was keeping debt down. There were times where Baugher thought about, say, purchasing a new tool for his remodeling business, but realized that would put undue strain on his family’s finances. Here, Baugher discusses his approach when unforeseen events did cause the family to take on debt.

 

[Rob Baugher] “We basically decided together that one of the best things we could do is to get the debt under control and eliminate it.”

 

[host] If they got a larger lump sum of money than his regular income, that went toward the debt and they also began making double the minimum payments. Those concentrated efforts ended up eliminating their debt several years ahead of schedule.

 

Ultimately, both families learned that there isn’t a magic formula for becoming a single-income household. Instead, it required a mix of good communication, smart budgeting and a common-sense plan to make it happen. Here’s Bowman:

 

[Peter Bowman] I think people often forget about this sound financial advice that some great people have been giving us for a long time, and they look for that quick fix. Ultimately, I think it’s hard work, setting a plan, sticking to it, and just being aware of your expenses enables you to pull something like this off.

h2

Learn how the transition to a single salary can go smoothly with the right financial planning.

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.