We have faced this situation twice. The first time was when I quit work to stay home with the kids. Almost never bought clothes for the kids except for shoes…used tons of hand-me-downs and gifts. We had a ten year old car and a 15year old second hand pickup truck. We kept them for five more years. We didn’t go to restaurants but we had dinners and parties with friends. Potlucks were popular. Did a childcare swap rather than hiring daytime help. Only vacationed with family. Did all the yard work and home maintenance ourselves. Painted the house ourselves, really slowly. It was do-able and a choice, but not always easy. I definitely had to keep careful tabs on the checking account when paying bills.
The second time was worse because it wasn’t the same kind of choice. Hubby got laid off just when I had gone back to work. So we had been planning to have two incomes and then we just had one–and I was not making the same kind of money he was. However, years of being frugal helped. We had money set aside for a home improvement project and we didn’t do it. That cushion of cash really helped me feel OK.
I like to think we live pretty modestly, but in reality we could pay more attention to things like food pricing, and we’d have to drop things like the 2 daily newspapers, that gym membership that’s not being used very often, the full Netflix subscription when we don’t watch the dvds that come in the mail regularly, the glass of wine with dinner, the travel to visit the kids, fresh flowers when the mood strikes, and my occasional internet shopping. You know, the little daily luxuries that you don’t notice but which quietly contribute to a comfortable lifestyle.
I think if the income drops dramatically, you have to carefully budget for having a robust enough emergency fund and just watch your budget more carefully.
Spontaneously deciding to eat out or go to a movie instead of cooking at home and watching TV would likely greatly decrease. You’d have to decide which auto repairs are urgent and which can wait. Ditto on home repairs and maintenance. You may have to use the payment to plan offered by insurer instead of paying the whole premium at one time.
Financially helping support family members and others would likely also have to be re-thought and perhaps recalculated. Even gifts would have to be more carefully budgeted and perhaps more of them may be lovingly handcrafted.
I know how we’d live on half the income…we did so not that long ago. At this point, I think we’ld have to give up and sell the house.
“Did you marry that professional gambler? I would imagine that would lead to some ups and downs in income.”
Professional poker player, yes. Financial planning is…an adventure. It’s all about maxing out the IRA in the good years. It works if you are an aggressive saver, and we both are.
Most independent consultants are the unpredictable income in the family, Instead, I’m our version of a steady paycheck. Luckily my business model is a lot more year-round than most of my colleagues’.
If ones income was cut in half, the taxes would go way down. I figure that since we save about half of our after tax income, and add in the taxes, there is half the income. So if we were comfortable not saving anything, I guess we could cut that, and that’s it. However, I don’t think I would ever feel comfortable with not saving. So I guess we would cut down (and have cheaper) vacations, watch our wallets more and not eat out much, and do a better job paying attention to spending.
I’d have hard time deciding which subscriptions to jettison. Two newspaper daily deliveries? Satellite radio in my car? Cable so I can watch baseball? Health club? Internet? Netflix? Amazon Prime? I guess it’s pretty clear how I could cut expenses every month.
@rosered55 and @toledo I’m staying positive and hopeful, lots of new beginnings right now (I am in the process of ending my four year marriage as well). Thank goodness it is springtime, I love this time of year and often exchange any negative energy into more productive energy. I secured a part time position for the summer weekends just yesterday and also decided to market myself as a “vacation nanny” and had business cards made up yesterday as well. Sometimes change is good, but I’m not usually one that goes looking for it, I generally need a push. Seems I got one lol.
I mentioned this in the other thread, but it kind of applies to this one too, so here goes…
When D was born I cut back to half-time at work and 2 years later when S came along, I stopped working entirely. H was confident it would work out but I was quite the doubter. We pretty much lived paycheck to paycheck and had NO extra $ for many years. I mean, we were fine, but there were no dinners out, summer camps, our vacations consisted of visits to the in-laws, etc…we didn’t have extras, but we certainly managed, and looking back I wouldn’t have done it any other way.
When D was middle-school ish, I happened into a couple of part-time/temp gigs at my old company, and just about the time the tuition bills started, I went back there full time. We didn’t even have time to adjust to being dual earners - we used all the “extra” (my salary) to pay tuition. I often tell folks that it was only because I DIDN’T work when the kids were young, that we were able to send them to college debt free. Makes no sense, but it’s true (for us, anyway).
We would be fine, I believe, if that scenerio happened to us although I might not sleep well at night. House and cars are paid off and our utilities are minimal. No extravagant spending and no debt. Most of our extra earnings go right in to savings and that would stop but we are just entering our 60s. We have a lake home and that is also paid off. I am already cutting back in anticipation of retirement because I am paranoid about no steady income. Ha! I have never really been extremely frugal but finding myself becoming so. H and I now go out for Happy Hours when food and alcohol are discounted instead of expensive dinners, we use the library instead of buying new best sellers and like the famous Bogleheads advocate, tear my dryer sheets in half. 
H doesn’t even realize what I have been up to by making these changes. One of our biggest expenses is our cable bill as H has to watch every sports team every season! Ugh…
Wish I could wean him from that!
I had to deal with an adjustment to half income about 3 years ago, when now-ex H left. How I’ve been managing:
- I refinanced the house with a 30 year mortgage, instead of the 15 year one it had been on. Mortgage balance went up dramatically, since I had to "buy out" the ex-H, but I got the payments to where I could manage them. I will very likely downsize once both kids are out of high school.
- I had just bought a new car. Poor timing, but I didn't know, and the old car was 14 years old. I got some cash out of the mortgage refinance and paid off the car. That means I pay slightly more interest on the car over the life of car loan or mortgage, but the interest is tax-deductible. So it's a wash, and my cash flow is protected.
- Income taxes went way down due to decrease in income, and also because of filing Head Of Household.
- I had a really sweet 4-day-a-week schedule, at 80% salary. Sadly increased to five days a week, at 100% salary.
- Ditched the cable, home phone, weekly housekeeper
- Vacation budget is about 25% of prior vacation spending.
- Very sadly adopted out my daughter's horse to another family. She was not riding much, and we are still able to "borrow" him occasionally. We still have my horse, who is aging and isn't really adoptable.
- Cut out almost all of my discretionary spending on stuff for me. I have bought almost zero new clothes in the past few years, my computer is ancient, my phone is ancient, I don't get manicures with friends, etc.
- Reduced some discretionary spending for kids. They still get everything they need, and most of what they want. But they are aware of our budget, and have adjusted their expectations without my asking.
It’s been a tough transition. I can’t really complain to anyone, because objectively they see: nice house, new car, decent income, etc. I know that my situation is still way better than many people’s. And yet it is still a difficult adjustment.
Move. Could not afford to stay in Hawaii, Would have to sell this house and go, which would mean starting over with a new job or practice in a new state, probably taking another bar exam. Ugh.
Would have to cut back on food (we already shop the sales, but we also buy lots of fresh fruits and veggies, and meat, and hubby is a bit of a gourmet, so we spend a lot more than is necessary on food), and Starbucks. And stupid things like Spotify and Directv. And wine. And diving. This would be awful.
And could no way afford health insurance, without a whopping subsidy. We’re in that awful spot between 55 and Medicare.
This thread has been so interesting to read. I can see that many people have really given the idea some deep thought and some have already experienced this scenario or are preparing for this scenario.
Our house will be paid off in less than a year. Yeah! Though our house payment is very reasonable, it will still be a savings. The two bills that are totally outrageous to me are our cell phones and the cable. Ridiculous. H is not about to give up cable though. There are 6 of us on our cell phone plan (3 of our kids - 2 of who supposively pay for their portion to my H - I think they could be better about that, and one spouse of our kids). My parents would freak if they knew how much we pay for tv/internet/phone and cell phones.
We could do it with no adjustments, since we are (as of this month) saving about half our net income. House is paid off and no debt. We are fairly frugal, and handle all household tasks our selves. Changes for when inflation erodes the value of of our defined benefit pension/and/or the state and city decide to reduce said pensions due to financial bankruptcy: sell house and move to someplace with lower taxes and cost of living and bank the extra cash, become a one-car family, work parttime or casual job (crossing guard, tutor, music teacher?) cook at home more.
We are happy to only be paying 1 tuition now (for 2 years we paid 3). I used to joke that I wasn’t sure what is cut out when kids went to school - I already brought lunch from home almost every day. If our income was cut in half, we could survive in our current location, but it wouldn’t be fun. First thing to go would be the amount we are saving for retirement. Verizon gets a big chunk - that would be second. No more going out multiple times per week (probably our “worst” habit, and no more spending lots at the wine store. Our cars are paid off, but I would have to drive mine even longer. We might have to refinance back to a 30 year mortgage. We have it easier than many, I know.
@Mommertons Sounds like you have it handled 
Kids will be fine, you’ve covered all your bases. The thing I’ll miss the most is vacation time but now I’ll just hang on the deck with my girlfriends escaping their husbands for an hour or two, hopefully you have a circle of your own as well ! Best wishes.
We did this (by more than 50%) back in 2002, when my husband was laid off and decided to start his own business instead of seeking another corporate job.
We were already doing all our own home repairs and maintenance and driving older cars. No gym memberships, hair appointments, nails, housekeeper, pool guy…we had never had them, so couldn’t give them up.
The big differences weren’t things we did. Taxes went way down. COA at my daughter’s pricy “meets full need” university went waaaaaaaaaaaay down. We quit retirement savings. Refinanced our mortgage to a much lower rate. Suddenly our cost of living was much lower.
A few years later he found an ideal job at another corporation, and some of the above luxuries came into our lives after the final tuition bill was paid!
Thanks, @NEPatsGirl! I wouldn’t say I have it all handled, but so far it hasn’t come crashing down. I hope your situation improves soon; with your positive attitude, something is sure to work out!
Hugs to all who had to experience this IRL.
We did this voluntarily when my second kid was in college. H quit medicine, went into teaching. We also bought a second home at almost the same time, using what was left of savings for big down payment–need to keep the first one because it’s where our jobs are. But we have done no work on it; our attention is on the second one–primary one is paid off, but the taxes are awful. Bathroom in dreadful shape, windows are horrendous, etc etc.Over 100 years old and it shows it. Can’t wait to sell it.
We have been prepaying a 15 year mortgage on the second one. If our income halved AGAIN, I’d try to refinance to a new 30 year to hold onto it. Actually, I think at that point, we’d ditch the primary house and it’s ridic taxes, pay off mortgage on the second one with the proceeds of the first (which will barely clear what we paid for it 25 years ago), and look for piecework in that area to bridge us to SS and pensions.