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Live On One Pay Check

by retirebyforty on July 20, 2011 · 68 comments

in early retirement, goals and milestones, saving tips

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live on one paycheck

flickr - bigburpsx3

Like many modern families, we both work full time and have two incomes. It was great to be a DINK couple for over a decade. We can afford pretty much anything we want, travel to exotic locations, and we didn’t have any problem putting money away into savings and investments. We live below our mean and didn’t have many money problems. Eventually, I want to leave my full time job and we had a chance to try living on one paycheck during the 3 months of bonding leave earlier this year.

We already have been reducing expenses over the last few years in an effort to eventually live on one pay check. I thought we were quite far off from being able to do this, but things aren’t looking too badly after each monthly accounting. In April and May, we had a small negative cash flow which was expected, but in June we actually had a positive month. We are a lot closer to being able to live on one paycheck that we thought!

This week I went to our online tax program and deleted my whole W2 income to see what would happen to our 2010 tax and guess what… We swung from owing the IRS $4,000 to getting about $5,000 refund. That’s a huge turnaround. It’s like an extra $750/month pops out of thin air. hahaha :D! I have been taking all the W4 exemption in my paycheck over the last few years. I’m pretty sure Mrs. RB40′s W4 is still claiming only 1 exemption. When I leave my full time job, she can increase that to 3 or 4 and we would have quite a bit more monthly income from her paycheck!

Couple that with the extra $450/month reduction in the rental home mortgage payment (refinanced to get lower payment) and I am pretty confident that we will be able live on one pay check soon. It seems like we are right there and just a few more moves will enable us to get over the hump. I still have a few years left before I turn 40 so I’m very optimistic.

One thing we are working on is acquiring a 4 plex, but that deal seems like it’s going down the drain quickly. Not a big problem though, we can just move the down payment into my dividend portfolio instead. Lately, I’m beginning to think investing in an REIT might be less headache than owning more real estate.

I’m pretty sure quite a few Yakezie bloggers are living on one paycheck and saving the whole other one. This is a great way to turbo boost your saving and investment. I know having kids can throw a wrench into this dual income thing. If you have 3 kids, the day care will cost over $3,000/month. You’ll have to be making quite a bit more than that to make it worth it.

What is your situation? Dual income no kids? Dual income with kids? One income? I’m curious to see what everybody’s situation is like. If you have two income, can you live with one paycheck?

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{ 59 comments… read them below or add one }

LifeAndMyFinances July 20, 2011 at 3:53 am

Great job living on one paycheck! My wife and I are striving toward this goal (we’ve done it before) once we move into our house.

The great thing is, while we will reduce our expenses to the amount of her day-job, we both have side-gigs as well that bring in quite a lot of money. So, even if one of us loses our jobs, it’s going to only be a 25% loss in our total income.

Good luck finding that 4-plex! I can’t wait to read about it!

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retirebyforty July 20, 2011 at 2:57 pm

Good luck on getting back to living on one paycheck! Wow, that’s great that you two are bringing in multiple streams of income. You’ll have that house paid off in no time.

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Jana July 20, 2011 at 5:34 am

We’re 2 incomes with 1 kid. We’ve tried to plan a budget for 1 income but right now, with our current debt load and expenses, it’s not feasible. Once a couple of debts are permanently removed from our life and our daughter starts school, we could do it. It would be tight but not impossible.

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retirebyforty July 20, 2011 at 2:58 pm

I know what you mean. With 1 kid, the day care cost already made it impossible to live on one pay check (now that I’m back at work.) If one of us stay home, that cost will be gone though.

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Moneycone July 20, 2011 at 5:43 am

Love that word – DINK! The rental home refinancing was pretty slick RB40. Exploring REITs is another good option for some stable revenue. The housing market being where it is, this a good ‘buy low’ moment.

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retirebyforty July 20, 2011 at 3:00 pm

Doh! I missed the opportunity to make a bunch of acronyms. DINK, DIOK, SINK, etc… That’s what happens when you write a post at 10pm. :(
I’m beginning to think REIT is the way to go as well. You don’t have to deal with tenants and their issues…

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Kellen July 20, 2011 at 6:16 am

Yeah, but if you have a parent staying at home, then you save $3,000/month on day care!

I get the impression you’re not really going to be “Retired” by 40, just pursuing money from other sources than your regular day job :)

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retirebyforty July 20, 2011 at 7:42 pm

You got it! I’m just retiring from my corporate job. ;)

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LLF July 20, 2011 at 6:17 am

Traditionally, a lot of women stay at home during the early years of starting a family. It makes financial sense to stay home and watch 2 or 3 kids instead of send them to daycare. After the kids are all in grade school, some women start going back to work at least part time. So if you are having more baby rb40s, go for the stay at home dad thing. Plus, who says you can’t earn some side hustle on the ol’ interweb?
We are DINK and have 2 kids, one in will be in school this fall (thank goodness). We used to live on one paycheck and save the other, but not so with kiddies. Once they are in both school (public) then we might go back to that again, I hope.

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LLF July 20, 2011 at 6:40 pm

we were DINK, I mean to say

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retirebyforty July 20, 2011 at 8:16 pm

We are not planning to have anymore little ones, but I’m planning to be a stay at home dad in a few years anyway. :)
Good luck getting back to living with one paycheck. From what I heard, kids just get more and more expensive as they get older….

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Everyday Tips July 20, 2011 at 6:53 am

We have been everything: DINKS, double income kids, single income 3 kids, 1.5 incomes 3 kids, etc. I am working part time from home for a company now, plus I blog. The money I make is used for savings and vacation, we do not pay fixed or most variable expenses using my income. When I had 0 income, we got used to living on one paycheck, and have kept that mentality even when I did go back to work. My ‘real’ job is variable based on the project I am on. I work a year or two, take some time off, then they call me back if they have another project, etc. Works out good. But if I am off for awhile after my current project ends, we will be fine.

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retirebyforty July 20, 2011 at 8:18 pm

So you are living on one paycheck now. That’s great! You are expanding your online empire anyway so maybe you won’t have to go back to the part time job one day.

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Everyday Tips July 21, 2011 at 5:36 am

I am in ‘part time’ mode right now, so I we get a paycheck and a half. Having the ability to be flexible is a wonderful thing.

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Financial Success for Young Adults July 20, 2011 at 7:30 am

I’m single so I definitely live on one paycheck lol. But my goal is to eventually live on only half of the paycheck and then be able to generate enough passive income to support my shopping addiction :)

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retirebyforty July 20, 2011 at 8:19 pm

That’s a great goal, but shopping addiction is going to take more than passive income to satisfy. :)

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No Debt MBA July 20, 2011 at 8:45 am

We’re DINKs, but we keep separate finances so it’s more like we each live on half of our paychecks rather than spend one and save the other. We make similar amounts so it’s effectively the same thing. Saving 50%+ is such a great financial tool and we’ve found it gives us a lot of flexibility and peace of mind.

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retirebyforty July 20, 2011 at 8:22 pm

If separate finances work for you, that’s great! It’s awesome that you are still saving 50%+. Sometime I feel separate finances make you want to spend more money since it’s your portion.

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Henry @ TotallyMoney July 20, 2011 at 8:50 am

I am definitely a DINK at the moment and we can live on one paycheck, but it wouldn’t be that pleasant. We are trying to save the second income for a deposit on a house, but it is taking a lot of discipline. We should really get into a situation that we can live comfortably on only one income. I am working on a second income stream, but it will be quite a while before just one person working would be a desirable situation.

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Crystal July 20, 2011 at 9:21 am

My husband and I are still DINK’s. For about 4 months, we had triple income, no kids, but I have left my day job now (woot!). He makes $47,500 a year before taxes and it looks like I am making $36,000-$60,000 a year before taxes (I’ll have a better idea by the end of the year). We live on about $38,000 a year after taxes and save the rest. We’re hoping that we’ll be able to retire early at age 52 this way.

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retirebyforty July 20, 2011 at 10:26 pm

Triple income no kids sounds like a dream!!! You guys are doing so well. I bet you can retire before 52 since you are putting away so much each year.

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Barb Friedberg July 20, 2011 at 10:25 am

You can do it!! Like anything else, once you adjust, it’s no big deal. You will be amazed at the ways your investments will grow and how you may find other avenues to bring in some cash.

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retirebyforty July 20, 2011 at 10:27 pm

Thanks for the encouragement! It’s just going to take a little time. :)

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Lindy Mint July 20, 2011 at 12:23 pm

We had big plans for being DINKS, but six weeks into marriage, we botched that one. ;)
So we’ve been rocking the DIWK plan for a while now. My dream is to quit working when my kids reach their early teens. It’s backwards, but I want to be around when they start to get wise and mischievous.

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retirebyforty July 20, 2011 at 10:29 pm

Haha, it happens. :) Hope you can achieve your dream!

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Andy Hough July 20, 2011 at 2:14 pm

We are dual income with one child living at home. Our combined income is still pretty small so we both need to work. However since we are both self-employed and we have a lot of flexibility in when and how much we work there isn’t really any point in one of us not working. We plan to semi-retire and travel around the country after the youngest child graduates high school.

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retirebyforty July 20, 2011 at 10:30 pm

That’s great! I wish I could work flexible hours, but we just can’t do it with our job. Hopefully, I’ll be self employed some day so I can spend more time with our little guy.

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krantcents July 20, 2011 at 4:33 pm

We are a dual income family with grown up kids! Since we max out my 403B, IRA and Roth IRA, we almost live on one pay check. It is not that hard because we no debt except for a small mortgage. We have a lot of flexibility and have a pretty low profile lifestyle.

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retirebyforty July 20, 2011 at 10:31 pm

Excellent! It must have been a nice boost to your income once your kids are grown up!

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SB(One Cent At A Time) July 20, 2011 at 8:42 pm

we are a single income family and live in one pay check, still we can save 50% of the salary. Good advises

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Miss T @ Prairie Eco-Thrifter July 21, 2011 at 8:10 am

Congrats to you for living on one paycheck. That is awesome!! This is one of our goals. We would like to use one paycheck for expenses and the other strictly for savings. We haven’t quite gotten there yet but we are on our way. Hopefully within the next couple years we can start this.

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retirebyforty July 21, 2011 at 10:18 pm

Good luck!

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Ginger July 21, 2011 at 8:20 am

My DH and I live on one income and use the side incomes (including my part-time job) for extras and savings. Last year we used it to save for our wedding, this year (and hopefully from now on) it is going into retirement and savings. Living on one income can be such a relief, if helps shield you from financial problems and down turns. I am not sure that is possible to do when you have kids and daycare, part of the reason many women stay home, but until then I am going to save as much as we can.

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retirebyforty July 21, 2011 at 10:19 pm

Great job! I’m glad to hear you are saving as much as you can now. When you have kids, it’ll be a lot more difficult. :)

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Broke Professionals July 21, 2011 at 10:54 am

We are DINKS (but planning to start a family in the next year). We ran a quick back of the envelope calculation to see how much I have to make from my blog to take some time off without affecting any of our goals that we are saving for. If we move away from California, it would work well, but in CA we need a lot more. I have to do a real calculation with tax, 401k and everything we take before tax into consideration as well. Because I want to continue putting away as much as we put now into retirement even if I quit.

You have developed a good cushion with real estate and investments. Great work!

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retirebyforty July 21, 2011 at 10:20 pm

Yeap, CA is expensive. Thanks for the complement.

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Jeff @ Sustainable life blog July 21, 2011 at 12:25 pm

Keep up the good work and soon you’ll be able to retire! You’re getting so close. Have you looked into buying a larger house and converting it into a duplex/4plex yourself?

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retirebyforty July 21, 2011 at 10:18 pm

Not really. That sounds like a lot of work and I am not especially handy so….

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Matt Wegner @ Financial Excellence July 21, 2011 at 1:34 pm

We’ve never been DINKs. Always lived on one income and did well with two kids. We’re debt free now so it makes it a lot easier to do but living within our means has always been a part of our lifestyle. I’m looking forward to becoming DINKs when the kids move out of the house!

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retirebyforty July 21, 2011 at 10:21 pm

It’s great that you are debt free. Not many people can say that these days. ;)

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Freddie @ Invest With Passion July 21, 2011 at 2:12 pm

This is a great goal you have here. We are a two income two kid household. Working on living on paycheck, but not there just yet. I am hoping to get my blogging and web design profit high enough this year to make this dream a reality.

From there the goal is to remove the need for web design and live just on the blog revenues from anywhere in the world. Closing in, but have a way to go. Just need to increase my efforts (doing a bit of outsourcing now) and we will see what happens.

Best of luck to you!

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Money Reasons July 21, 2011 at 6:46 pm

We never had our money stream in synch until the last 3 years before my son was born, and even then, we saved up our money for an over 20% downpayment on our house.

After my son was born, my wife didn’t want to go back to work, so money has been tight for a while. There were a few years that he had to skip vacation. But now that has all changed and I’m going for a more balanced lifestyle…

So for the past 10 years (or so) we’ve mainly have been a 1 income household. My wife did pick up a job for spending money though (she now works 8 to 10 hours a week as a bookkeeper/accountant).

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The Passive Income Earner July 21, 2011 at 8:33 pm

We are a 1 income 2 kids and have been for over 10 years. I have never experienced the dual income … Soon though. That’s going to be the gravy train :)

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youngandthrifty July 21, 2011 at 10:57 pm

I love the DINK lifestyle.. but I will be dropping down to part-time come September for two years when I go back to school. My boyfriend and I keep separate finances and do a joint account.

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Money Beagle July 22, 2011 at 9:09 am

My wife is a stay-at-home mom so we have a one-income household by default. She did work before, and when we found out we were pregnant, we started adjusting our finances so that by the time she quit we were running solely off my income. That made the transition seamless PLUS it allowed us to pay off a bunch of our student loan balance using 100% of her income for those last several months.

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Spruce Up Your Finances July 22, 2011 at 5:38 pm

We are currently living with just one paycheck but eventually this will change when my wife graduates from college. We’ve really tighten the belt during these times and an extra income would really help us a lot!

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Evan July 22, 2011 at 9:31 pm

The Wife and I both work, but she works from home and not that hard lol. She provides her portion of expenses (when we split everything 65/35) through her existing customers so I can’t complain too much

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101 Centavos July 23, 2011 at 3:18 am

Great job on moving towards your goal. We’ve always been one income with two kids.

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World of Finance July 23, 2011 at 10:59 am

DINK (Dual income no kids), great acronym :) … I am currently MINK (Multiple income no kids) with extremely low expenses :) Great post!

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TJT July 24, 2011 at 9:29 am

My family is now living on 20% of one paycheck, which leads to a great positive feedback loop of investing. I’m saving at a high rate, therefore investing more, leading to higher dividend income which results in a lower percentage of my paycheck used, which leads to more investing… And so on… :)

I should be on 0% of my paycheck within 18 months.

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Paula @ AffordAnything.org August 1, 2011 at 8:21 am

We live on one income right now, while I re-build my business. Our cost of living is low, so we end up with savings every month. I’d ideally like to be saving more and investing more, but I suppose that’s the sacrifice I’m making for the sake of “not working” // building a business that doesn’t pay off right away.

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South County Girl August 7, 2011 at 8:37 pm

We just got married a little less than a month ago, so we were Single income, no kids…

but my husband just got a full time job on friday and starts tomorrow so now we are DINKS. We are planning on living on one income and using the other to save for a rainy day and start funding our retirement accounts since we are debt free (sans the mortgage)!!!!

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retirebyforty August 7, 2011 at 9:31 pm

Congratulation! Enjoy your marriage for a while before you have kid. :)

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BytheGraceofGod October 29, 2011 at 10:17 pm

Were a family of 5 living on my husbands sole income of 65k a year. We do not recieve any type of government assistance. Have great medical, dental, vision benefits from his company also 401k etc.. (great company to work for). He has a company car & we live the Dave Ramsey way.. and bought our 3 yr old Lincoln Navigator with cash. Husband has excellent credit & we have a big beautiful home. I buy most of my kids clothes off of ebay (all designer labels) as well as a season ahead when they’re on sale, and our house and car were “steals of a deal”… I dont buy anything unless it’s a good deal. We also don’t pay for anything (except mortgage) on credit. In my opinion, maxing out your 401k is one of the best choices you can make, why would you pass that up? It’s free money! I don’t use coupons for food or anything like that, but I do grocery shop at walmart because their great value brand is less expesive. We tried Sams Club for a year and “broke even”. With all of that being said, I find that we just don’t have the extra $ to put aside for the kids college funds and still “have a life” now.

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Lisa @ Cents To Save November 17, 2011 at 8:38 pm

Oh…. we are living on my husbands income and my unemployment for the last 3 months. So far so good! Hoping to be able to do the same when I do find another job.

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retirebyforty November 17, 2011 at 9:58 pm

Good luck on finding another job soon. Can you live on just your husband’s income?

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Eric H. Doss February 13, 2012 at 5:07 am

My wife and I have been living on one paycheck since the beginning of this year. We set a goal to be debt free this year and the easiest way to get there was to live on her salary and spend my paychecks on paying off debt.
Last month was a surprise. We overbudgeted in some areas and were short in others, but the overall budget worked and we stayed in bounds, with the exception of a $14 iTunes purchase. We’ll see how we hold up over the next 10 months.

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retirebyforty February 13, 2012 at 9:16 am

Good luck! It’s easier than you thought right? I’m sure many more families can live on one paycheck and save the rest, but when you’re stuck in the spending cycle, it’s hard to see that.

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Eric H. Doss February 13, 2012 at 9:19 am

Very true, much easier than you expect.

I don’t think we’ve totally changed our spending habits, but we’re working on it. No need in beating ourselves up about spending the $14, it’s reasonably insignificant and we don’t want to lose sight of the bigger goal.

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