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Making Do with Less

It’s quite a task in today’s world to make do with just one person’s income and also enjoy life while at it. Therefore, to make both ends meet it has become imperative that both spouses work-managing expenses, meeting future goals and chasing your dreams thus become easier. However, the going becomes diffi-cult when one of you discontinues work to, say, take care of babies or ailing parents.

PRE-EMPT

Giving up an income is never easy. However, if such a situation arises, be prepared for it. Before giving up an income, prepare a sabbatical corpus, especially when expenses and goals are being shared. This is the fund that will supplement the single income when one of the earners goes on a break. Plan for cash flows to meet at least the next six months’ expenses . Importantly, do not depend or dip into your existing emergency funds made to meet exigency situations.

CHALLENGES

Meeting the existing shared commitments, 

such as home loan instalments, is crucial. To deal with situations such as this, you might want to either plan well ahead to prepay a lump sum towards your home loan (prepayment brings down loan tenure and the principal amount), or drastically reduce your expenses to make way for instalments. With the burden now on one of the earners, make sure you bring down monthly expenses-if there are personal loans to be serviced, try to prepay them too due to their higher interest rate burden plan.

PROTECTION FIRST

Having all family members covered with health insurance will have half the trouble dealt with. You must know that if there is a break in the job, the group health coverage gets stopped. For maternity benefits, however, the husband’s group coverage might still be used when wife gets hospitalised. It is always better to have individual health policies to be on the safer side. With one single earner and all other family members depending financially on you, consider reviewing your life insurance-increase your life cover through a pure term insurance

SAVINGS

Rebudget your household expenditure. For future savings, estimate how much you can save on a single income. For this, you need to get a good grip over your current expenses. You might have to reduce some of your discretionary expenses on white-goods, outings and so on, if the savings rate is any lower than 20 per cent of your income. Else, you may have to selectively reduce some highticket costheads from the discretionary spending, especially, if you do not foresee any major increase in the single income in the near future.

LONG-TERM GOALS

Do not compromise on goals such as retirement and children’s education. See if existing systematic investment plans (SIP) in mutual funds can be continued. Provision for other commitments such as insurance premiums has to be made. Contribution to Public Provident Fund (PPF) may be restricted as it can be anywhere between `500 and `1 lakh a year. Continue with investments earmarked for each goal without breaking or dipping into the funds. Future commitments should be taken after a short gap once you get used to the new income situation.

CONCLUSION

For most it will be going through phases of uncertainty when moving from double to single income. But a prudent examination, proper planning and disciplined spending will help immensely. This transition is not something you will get used to overnight. Give yourself time to fit into the new pattern.

Next To Come: Inheriting Wisely