The One Paycheck Blues
By Janet Farley
SUMMER 2009
Once upon a time, military families could make it comfortably on one paycheck alone. Those fairy tale days have long since ended. Today, it's no secret that many families rely on two incomes, the one earned from Uncle Sam for active duty service and the other one earned on behalf of a hard-working military spouse.
What happens, however, when that hard-working spouse loses his or her job by fate, choice or force? All it takes, after all, is one PCS move, a new baby or a pink slip to derail the best laid financial plans and find a family singing the sad song of the one paycheck blues.
While there are certain advantages to not having to work such as decreased taxes and increased quality time with your family, there are definite disadvantages as well, particularly if you've come to rely on that second paycheck to meet basic living expenses.
To help minimize the financial strain when two paychecks become one, or to simply get a handle on your overall financial situation, consider applying the following three steps:
STEP ONE: Review and re-evaluate your financial goals
"When going from two paychecks to one, it is important to outline your financial goals," said Stacy Nichols, Community Readiness Consultant and Personal Financial Readiness Core Compliance Expert at the Airman and Family Readiness Center in Ramstein Air Base, Germany.
According to Nichols, saving for college, going on family vacations and having enough to enjoy the holiday gift-giving season can be accommodated even on only one paycheck.
"It is important to work backwards. Determine what you want the end total to be for the goal, then figure how many months and/or years you need to save for it. Finally divide the two (the dollar amount needed by the available time) and it will show how much you need to put aside on a monthly or yearly basis," said Nichols.
"For example, Christmas comes every year. If you know you spend on average $1,200 and it is almost June, you need to put aside $171.43 to have the money by the beginning of Dec for Christmas," said Nichols adding that planning is vital to any financial plan.
STEP TWO: Live by a budget, cutting expenses where you can
It might not be a word you like to hear, but having a b-u-d-g-e-t is essential.
"A budget is critical in any financial plan, especially when two paychecks have become one," said Nichols who stresses the importance of knowing where the money is going and cutting down where you can.
For example, Nichols makes the following cost-cutting suggestions:
- Save at the grocery store with coupons. If you are stationed overseas, you are even able to use coupons an additional six months after their expiration date at the commissary.
- Take advantage of "bulk sales" type store but take care to only buy what is needed because, in the end, it's not good deal if you don't use the product in the first place.
- Plan and shop for weekly menus only as opposed to buying for weeks at a time to avoid extra trips to the store.
- Realize that having fun doesn't have to cost tons of money. Instead of spending hundreds at an amusement park, pack a picnic lunch and go on a hike with your kids. Don't pay expensive fees to use fitness centers in town when you can use the on installation facilities and activities free of charge.
Nichols also suggests that you consider analyzing your current spending activities and researching a cheaper way to get the same things.
"For example, if you buy magazines off the rack while waiting to check out at the grocery store, you are paying as much as $5.00 for that one magazine and $60 for the year. If you were to buy a subscription instead, it may be as cheap as $14 for 12 months. You could save $3.84 per issue and $46.08 for the year. This may not sound like much, but small amounts add up when you do the big math," said Nichols.
Another way to save on your current lifestyle involves cutting down on the frequency of an activity such as eating lunches out.
"If someone ate out three times a week at the average cost of $12 a lunch, that amounts to $1,800 for a 50-week work year. Cutting back your outings to once a week can save $1,200 for the year," said Nichols.
"With only one paycheck coming in, one person will probably have more time to plan and cook the meals at home," said Nichols adding that lunch could also be packed for the hard-working service member rather than subjecting him to fast food or mess hall fare time times a week.
Plus, packing that lunch twice a week will help you save that $1,200 at the year's end.
STEP THREE: Proactively plan for a more secure future
In good times and in bad, it pays to have a plan for the future. Ideally, you have an emergency fund to access should you find yourself trying to make it on one paycheck. If you don't, consider building one as best you can now.
"Without that safety net, a family could end up in considerable debt either through loans or credit cards needed to deal with the emergency," said Nichols who advises families to have three to six months worth of living expenses set aside for an emergency fund, keeping in mind that a family of three may not require as much as one of six.
In addition to building a safety net, Nichols advises families living on one income who are used to living on two to avoid buying expensive items in the interim. "Now may not be the time to buy big ticket items or extravagant things," said Nichols. Instead, she suggests you build those costly items into your overall financial goals and save for them.
With credit cards still easy to use despite the national banking woes, the temptation may also be great to simply charge that HDTV to have in place just in time for the Fall football season. In a word, don't.
"Don't increase credit card debt which can further impact your credit future (negatively)," said Nichols. "It will take you a long time to pay it off and you'll be paying extra in interest while you're at it," said Nichols.
Additional Tips to Beat the One Paycheck Blues
- Visit your installation's financial readiness manager at the family support center for personalized assistance.
- Update your resume and actively seek employment. Consider working part-time or temporary assignments until you land a full-time job.
- Consider updating your job skills while you are unemployed. It will help to make you more marketable as you seek new employment.
- Save on gas and wear and tear on your car by carpooling with others where you can, by walking when feasible or by using public transportation.
- Shop the grocery store and department store sales.
Military spouse Janet Farley is author of two recent books: The Military Spouse's Complete Guide to Career Success (Impact Publications) and The Military-to-Civilian Career Transition Guide (Jist Inc). Visit www.janetfarley.com.
