If you are considering switching from a two-income family to a one-income family, there are several things that you will need to consider as you make the change. You need to make sure that you can afford to make the change. If you feel that you can here are five things to consider to make the transition smoother.
1) You need to make sure that your entire family still has health insurance coverage. It is important to take this factor into account when you are considering your new budget. Health insurance coverage can vary widely from company to company and plan to plan. Be sure that you will be able to continue to have coverage.
2) You will still want to have a retirement fund for the spouse that stays at home. You can do this by opening an IRA account. If you want to increase your retirement savings you may want to open another type of account to save as well. Be sure you understand the changes you need to make on the working spouse’s retirement, since you may want to increase the withholdings. You will also need to decide if you need to rollover the stay at home spouse’s 401K into a different plan.
3) You will need to make sure that you still have adequate life insurance coverage for both spouses. Many people think that if one is not bringing any income into the home, then you do not need to cover that spouse. Your household costs will increase to cover childcare and other expenses if one spouse was to pass away.
4) You may need to adjust your withholdings. You can likely increase your withholding so that you have more take home pay. Be sure that you do not have too much withheld however.
5) You should increase your emergency fund. If you only have one source of income, you need a larger amount to cover the time while you are looking for work. It is important to make sure that your family can continue to function if you have no source of income.
You can try living on one spouse’s income for a month or two to see if it really is a feasible option for your family. This will give you an opportunity to iron out any adjustments, before you are already committed to the change. Put the extra money into savings so that you can increase your cushion.
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