To see if downsizing from two paychecks to one is feasible for your family, run through our "Can one of you afford to quit?" worksheet. It lets you take a real-life look not only at the obvious -- how your income would decline -- but also at how some expenses will fall, too. You'll be reminded to project how much you might save in child-care costs, taxes and clothing expenses when one of you stays home. Remember, for example, that your car-insurance premium may dip if you stop driving to work.
If the worksheet shows that giving up a paycheck will push you into the red, don't despair. The thorough listing of where your money goes now is a perfect starting point for planning adjustments that will help you reach your goal.
Elaina and Jared are performing an impromptu finger-puppet show. When their mother applauds, they protest: "We're not finished yet!" The 4- and 5-year-old stop in the kitchen for juice and animal crackers and then wander outdoors to wave bubble wands in the sunny backyard.
It's just one of the quiet, mundane moments that make up a childhood. The preschoolers' parents, Marcus and Lisa Marchegger, have spent several years arranging their finances so that at least one of them could share such moments.
Now, Marcus, 39, earns a lucrative income as a loan officer at Neighbor's Financial Corp., in Sacramento, Cal. Lisa, 34, happily does home duty, including poring over the budget to keep the plan on track. Of the high-paying job she left, as vice-president of a credit union, she says, "They'd have to drag me kicking and screaming to get me to go back."
For the Marcheggers, living on one income has been a longtime goal. For many families, though, the drop from dual-income to single-paycheck status is an unwelcome change forced by the loss of a job. Still, whether you're following your dream or surviving a pink slip, you can ease the transition with planning, flexibility and discipline. Such a formula may prove liberating even for reluctant one-incomers. Outplacement consultant John Challenger notes: "There are some families who have said, 'This is a better lifestyle. We can manage our lives and be happier this way.' "
Face your future
When Elaina was born in 1999, the Marcheggers decided that Lisa should stay home, even though Marcus, then an auto-shop manager, couldn't come close to duplicating their joint income. "We always knew that's how we were going to do it," Lisa recalls. "But I don't think we spent enough time figuring out how it was going to happen. We never sat down and looked at the real numbers."
It's a big mistake to assume that the financial issues will work themselves out, says Charles Long, author of How to Survive Without a Salary (Warwick, $15). Long recommends that families take a hard look at their finances and start making adjustments as soon as a change appears possible -- even if it's years ahead. Before Long left his salaried job as an economist in 1975, he and his family spent three years "whittling back expenses and seeing what we really needed and what was fluff."
Families facing a layoff don't have the luxury of that time frame, which gives them all the more reason to do a quick reality check when the ax falls. "People go out and buy self-help books, talk to Dr. Phil, do everything except grab the oars and start rowing," says William L. Tatro IV, author of The One Hour Survival Guide for the Downsized (DC Press, $17). Instead, he says, "you have to realize that this is an immediate change in your life." Don't panic, but don't slip into denial.
Analyze the budget
The first step in any downsizing is to identify all your assets, including such potential resources as the equity in your house, cash-value life insurance and a retirement fund. "A lot of people know about net worth but haven't really done the exercise," says Virginia Kravitz, a life coach in Rocky Hill, Conn. "Even if you see assets you might not want to tap in to, it's still confidence-building to know they're there." While you're at it, consider refinancing your house to lower your monthly payments or taking out a home-equity line of credit for emergencies. Each is easier to do when both you and your spouse have a paycheck coming in.
It would be nice if a quick look at your budget also revealed enough savings to cover three to six months' worth of expenses and a zero in the space where consumer debt might otherwise appear. No matter how spiffy your ledger, you'll probably need to scale back expenses to match a smaller income. Start by separating fixed costs, such as mortgage and car payments, from those that could be adjusted. "The key is variable spending," says Terry Gustafson, a financial planner in Carlsbad, Cal. "How many times a week do you go out to dinner or clothes shopping? Get the variables down to an amount where you can say, 'This is what we'll spend and no more,' so you can see what kind of cushion you have."
That doesn't mean you have to vow to eat beans and wear sackcloth forever. Indeed, most financial planners recommend preserving a few luxuries, just on a smaller scale. Says Tatro: "If you're used to going out to dinner three times a week and spending $100 each time, go out, but find a cheaper place."
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