- Many people have dropped out of the workforce during the pandemic.
- Cutting one big expense or several small expenses are just some of the ways to compensate without landing in debt.
Here's how to navigate the transition from two incomes to one.
The COVID-19 pandemic has had a huge impact on the U.S. labor force. Since March 2020, many Americans have exited the workforce and not yet returned. And while some people may have opted to retire early, others may be taking an extended career break until the crisis is over, whether because childcare has been an issue or because their jobs are public-facing and therefore less safe.
If your family is going from a dual-income household to a single income, the financial impact could be substantial. While you may have some savings to dip into, ultimately, living off of savings probably isn't sustainable. Here are three tips for managing if you've lost an income and don't expect to get it back for quite some time.
1. Slash one large expense if possible
If you've gone from a two-income household to just a single income, now's the time to look carefully at your budget and figure out if there are any major expenses you can cut. For example, if you're renting a larger home, you may have the option to move to a smaller one and reduce your housing costs substantially.
Another option worth looking at is getting rid of a car. AAA reports the annual cost of vehicle ownership is $9,666. But if one person in your household is no longer reporting to a job every day, you may have the ability to sell an automobile and eke out some big savings that way.
Finally, if you have children, you might manage to slash your childcare costs if someone in your household is exiting the labor force. That means not having to pay for daycare during the year, or for summer camp if you normally rely on school for childcare.
2. Trim smaller expenses in your budget
While cutting back on larger expenses in your budget will likely have the greatest positive impact on your finances, reducing your spending in smaller categories will help, too. Think about the things you can cut back on, whether it's canceling cable and replacing it with a less expensive streaming service or finding cheaper activities for your kids to enjoy (like joining your local recreation soccer or baseball team rather than paying a lot more to train at an expensive sports complex).
3. Maximize supermarket sales
If you have a family, food costs could eat up a lot of your income. But if you're savvy about the way you shop, you can save in that regard.
The good thing about dropping out of the workforce is that you may have more time to spend researching sales. Not only does it pay to scope out supermarket sales, but you should also try to plan out your meals in advance. Doing so could make it so you're only buying essentials that you know you'll use. You'll also be able to snag deals by stocking up on certain items in bulk as it makes sense.
Losing an income isn't easy, but it also doesn't have to wreck your family's finances. Follow these three tips to minimize that blow and manage well in spite of it.
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