It’s a tip worth following for sure.
- Having two paychecks at your disposal could give you more financial wiggle room.
- You may want to consider making changes to your budget that maximize your savings potential.
It’s easy to see why many married couples, or couples who live together, only have a single income to work with. For those with children, the cost of childcare can be high enough to eliminate the benefit of having a second paycheck.
But what if you happen to be part of a household with a dual income? Maybe your children are old enough that childcare isn’t an issue. Maybe you earn a high enough salary to make childcare worth paying for. Or maybe you don’t have children at all.
Either way, having two sources of income puts you at an advantage, financially speaking. And right now, there’s one key move you may want to make if that’s your situation.
Pretend one paycheck doesn’t exist
These days, many financial experts are warning that a recession may be imminent. And Suze Orman shares that concern.
The Federal Reserve is hiking up interest rates in an effort to slow inflation. Once borrowing gets more expensive, consumer spending is likely to decline. That could lead to a string of unfavorable consequences, like widespread layoffs. And that’s a reality Orman wants people to prepare for.
That’s why, in a recent podcast, Orman advised people in dual-income households to make one strategic move in the near term — try living on one paycheck and saving the other. Orman thinks this is a smart idea for a few reasons.
First, the more emergency savings you have, the easier it will be for you to get through a recession unscathed. If you don’t build up a nice amount of reserves in your savings account, you might end up with unhealthy debt if you lose a job and can’t cover your bills in full.
Secondly, Orman says that living on one paycheck could be a good trial run at the event that a recession hits your household and either you or your spouse/partner gets laid off. Finally, living on a single paycheck could force you to make more judicious decisions about how you spend your money. You may, for example, realize that your cable package and multiple streaming services aren’t worth paying for when you’re limited to a lower income.
Advice worth taking
The ability to live on one paycheck could work wonders for your finances during periods of strong economic growth as well as downturns. And so it’s a tactic worth trying out if you’re able to swing it.
Living on one paycheck is an especially useful exercise if both you and your significant other earn around the same amount of money. If one of you is a much higher earner and you simply stop living off of the lower paycheck, it may not be such an accurate trial run for a recession — not if the higher earner is the one who gets laid off.
But even in that case, banking an entire salary — even a lower one — is a great way to shore up your savings and buy yourself protection in case the economy takes a serious turn for the worse. So it’s worth taking Orman’s advice no matter what the pay difference is in your household.
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