5 Action Items for One-Income Households

Making the Switch to a One-Income Couple? Here are Five Tips

5 tips to help you transition to becoming a one-income couple

The number of one-income households is shrinking. Only 21 percent of married couples are one-income households, according to Bankrate. The other 79 percent of married couples are dual-income.

That's a huge departure from the year 1977, when 34 percent of married couples were one-income households. In other words, more and more couples today -- either by necessity or by choice -- are opting to become dual-income households.

But here's the problem: it feels like the rest of the world was designed around the assumption that one parent stays-at-home.

Contractors and service people (plumbers, carpet installers, appliance delivery people, garage door technicians) insist on meeting someone at the house during the middle of the workday. Children's after-school activities take place during the workday afternoon, causing parents to chauffeur their kids around while taking business calls. And the high cost of daycare can gobble up more than 50 percent of one parent's take-home pay, leaving them to wonder: what's the point?

Here are a few tips for couples who want to transition to one-income status:

1: Discuss Effort and Ownership

Some one-income couples fall into the trap of thinking that the working spouse is the only person who's making contributions to the household. The working spouse might start thinking that everything he purchases is "mine" instead of "ours."

BEFORE you transition into single-income status, make sure you're on the same page about the mutually shared effort required to make your home life possible. While one spouse is taking conference calls, the other one is vacuuming the rugs and cleaning the baseboards. Both demand effort and hold intrinsic value.

You'll need strong and frequent communication to ensure that the spouse earning money doesn't feel "more" entitled to it.

2: Get Life and Disability Insurance

This second tip goes hand-in-hand with the first: make sure you buy life insurance and long-term disability insurance for the spouse that isn't working.

Many couples neglect to do this, thinking that since the non-working spouse isn't producing income, their contribution to the household doesn't need to be insured. Nothing could be further from the truth.

They're in for a rude awakening when, heaven forbid, the non-working spouse becomes sick or passes away, and the working spouse has to start outsourcing those household tasks. Hiring nannies, housekeepers, lawn-care providers, tutors, babysitters and errand-running personal assistants is expensive.

3: Reconsider Personal Costs

Some couples assume that they need to maintain certain types of expenses just because they're "normal." Re-think those expenses when you transition into a one-income family.

For example: do you really need to maintain two cars, now that one spouse isn't working? Can the non-working spouse walk or take the bus during the daytime, and use the car only at night?

Your answer, of course, will depend on your location and the availability of public transit or pedestrian options.

If you can't cut out another car completely, can you at least downgrade your fleet? Can you trade-in your 4-year-old car for an 8-year-old car, saving thousands in the process?

Attack your various discretionary costs. Slash your restaurant budget. Stop shopping as much. Cut vacations.

Start performing more do-it-yourself home projects, now that one spouse is staying at home. Don't pour hundreds of dollars into landscaping -- be content with a basic lawn with minimal-to-zero watering. Learn to fix your own minor plumbing leaks. Clean the gutters and power-wash the exterior yourself.

4: Save for Both Spouses' Retirement

I've said this numerous times, but it bears repeating: retirement savings is your number one priority.

The working spouse will need to save enough money to cover BOTH spouses' retirement. If the two of you have been earning similar salaries and you've each been saving 10 percent of your paychecks towards retirement, the working spouse will have to switch to 20 percent savings in order to compensate for the difference.

How much should you save for retirement? As a general rule of thumb, you should withdraw no more than 3 to 4 percent from your retirement portfolio each year. If you want to live on $40,000 per year in retirement, you'll need a portfolio value of $1 million or more. (This doesn't include other sources of retirement income like pensions and Social Security.)

5. Build an Emergency Fund

Keep a cash reserve (also known as an "emergency fund") for unexpected costs. If the one working spouse loses his job, for example, you'll be happy you had this money.

An emergency fund is different than a fund that will cover normal costs that happen at random intervals, like home maintenance and car maintenance. A broken dishwasher or a popped car tire aren't "emergencies," they're inevitable.

Keep separate savings accounts earmarked for random-but-predictable costs like fixing up your house, repairing your car, buying holiday gifts, paying an unusually high heating bill, making doctor's office co-pays and other expenses.

Online savings accounts like SmartyPig allow you to set aside money for various "small" goals like car repairs, vacations and other life events.