How to Manage Finances when a Spouse Quits Working

Double-income families have an edge over single-income families. When both the spouses earn, there is greater flexibility, financial liberty and more liquid cash at disposal. Letting go of such a lifestyle is not always an easy transition but with a little financial planning, you can work it out.

Be it taking time off from work to study, looking for another job, childbirth or to manage the family, there could a number of reasons why one spouse may not be employed at some point in life. Whatever the reason might be, the change is a big one and can leave even the happiest of couples in a vulnerable situation.

Also, if one spouse suddenly loses a job, it will shock the family. These kind of circumstances can also be very difficult to deal with. However, if couples learn to deal with such setbacks in a constructive manner, it will help the family in numerous ways.

How to deal with the change?

Dealing with any kind of change in life is difficult and it takes time to adjust to new ways of living. If you are used to getting two paychecks each month and you have to cope without one suddenly, it can be nerve wracking. But remember, if you deal with it the right way, it is may not be as stressful as it is made out to be. Lets us see how we can handle such tricky situations and prepare for the same. Given below is a step-by-step process on how to manage finances when one spouse quits working:

1. Set a new budget: A revised budget can be the best friend that never betrays you in times of need and desperation. Sit down and jot down all mandatory expenses such as loan EMIs, monthly utilities, grocery and travelling costs. Also include any other financial commitments like health insurance or life insurance premium payments. See where you can cut down on spending. Then, chalk out a new budget according to the new income level. Learning to stick to this budget is one of the most crucial things that will help you succeed in managing your family with one income.

2. Learn to use your credit card the right way: If you only use your credit card wisely, you can gain a number of benefits out of it in terms of freebies, discounts, cashbacks and rewards. First see what type of credit card you have and check if it suits your purchase needs. Compare credit cards and do some research on the pros and cons of each type of card.For example, these is no point in having a travel rewards card if you do not travel much. So see what your spending behaviour is as a family and go for one that best suits that. For example, according to financial experts, a one-income family should use a no annual fee credit card.

3. Make money on the side: You don't have to always have a full-time job in order to make money. Try to look for some freelance work or side gigs that will supplement your income. There are many freelance opportunities out there that can help you make some additional money. You can also try consulting, coaching, or selling your items online. One of the other options is to try and make some craft items or handmade goodies and try selling them.

4. Cut down on eating out and other unnecessary expenses: Make a list of all expenses that you have incurred in a particular month and then eliminate those expenses that you feel can be avoided. For example, dining out or ordering food could literally be eating into a large part of your savings. Even if you spend Rs.500 to Rs.600 per day on eating out, you will be shelling out around Rs.15,000 to Rs.18,000 on just food alone. You can easily avoid this by cooking at home regularly. If you feel it is difficult to cook each meal, make a larger portion and freeze it. You can always reheat the same and consume it on the next day. Not only will this help you save time but also your hard earned money. Look and analyze your spending and scrutinize your bills to find any type of frivolous spending. It is time to stop splurging and start saving.

5. Do not drain your savings or retirement corpus: No matter how tempting it is, using up funds from your savings or retirement corpus is a strict no no. Remember, you should cut back on expenses as much as possible but not use your hard-earned savings to spend. The trick is to strike a balance between spending and saving. That is why you need to have a systematic financial plan of action in place well before your spouse decides to quit working.

6. Have an emergency fund: Do not forget that apart from your savings pool, you also need to create a solid emergency fund that you can fall back upon at any point of time. This fund should be separate from the savings and retirement corpus, and should ideally be liquid enough to use as soon as you hit a crisis.

7. Make sure you are adequately insured: It is more important to have a solid insurance backing, especially if one of the spouses is not working or planning to quit a job. So make sure you have a good life insurance policy in place, especially a term insurance plan. It is okay even if it is a low cost one. This should be prioritized. Apart from this, a good health insurance policy is also a must in order to avoid unexpected hefty medical bills.

8. Be financially savvy: Be a smart spender. Look for good deals, discounts and offers when you make purchases. Use food coupons to buy groceries and make sure you use the internet to look for the lowest possible prices. Do some research and compare prices online before making a purchase decision.

A solid plan will help you cope with all the financial changes that may be happening in your life. Be patient and have a systematic approach to things. Just be a little creative financially, you will reap the benefits faster than you think.