I was scared the first time I did it. Scared of what could happen and what we would do when we only had one income to live on.
My beautiful wife and I went from two to one income when our first child came around.
Before we got married, we both decided to have her stay home and raise our kids and possibly have her homeschooling them. Many questions came into our minds.
“Would we have enough money to pay our mortgage?”
“Will our insurance cover everything?”
“Do we have enough savings?”
“Should we give up a stable job for something we believe is better?”
Even though all these questions and thoughts were running through our minds, we knew it was the right decision and no matter what, we would make it work. Looking back now, 8 years later, we never regret a minute of her not working.
My job and ever increasing rental property passive income helped us to live on only my income.
It is always scary taking a leap of faith.
Living on one income is definitely taking a leap of faith.
It is possible for you make the transition into living on one income. I have done it before, and I know I can do it again. Even though I’m worried and even scared.
So, how do you transition to living on your passive income once you believe you have enough money coming in from your investments?
Any time you go from two incomes to one income, the process is always the same.
Create A Budget (and stick to it!)
If you don’t know where your money goes, you will wonder where it went.
The very first thing you must do is create a budget. Download this quick budget worksheet and fill it out. It is quick and easy and will allow you to get a jump start on the move to one income.
The goal of your budget is ensure that your income is greater than your expenses.
Living on passive income is not like a paycheck. Some months are better than others and some months can be very bad. You could expect $6000 a month from your passive income but only bring in $17.
Believe me, it can happen.
It happened to me!
A long string of evictions, clean-ups, new property purchases, etc. made my rent income only $17. Not only that, but I had three months where I brought in $300 or less when I usually brought in $6000 in 2014.
That was a hard 3 months.
By having a budget, sticking to it, and the grace of God, we were able to weather the storm of those hard months.
The next step for you is to get a budgeting program like “You Need A Budget“. This program is amazing and will help you to create an amazing budget that will help you plan for just about everything.
The four rules for your budget from YNAB.
Increase Your Income
You don’t need to live off of one type of passive income for the rest of your life. Now that you will have 40+ hours to work on other passive income ideas, you will be able to bring in new streams of income.
Here is a short list of things you can do:
Write a Book
Each month I have been earning around $200 or so from the book.
Hey, $200 more than I had without it. Every little bit counts!
I created the content once and it sells over and over again.
I have an account I put all my amazon payments into at Capital One 360. Here is a screenshot of income from the one book. It doesn’t look like much but it keeps on growing. Imagine if I had 10 books bringing in the same amount of money…
Write a Song
I have to admit, this is something I will probably never do. But just think about how much passive income you will receive with just one song. Each time it is played, you make money. You do all the work one time and get paid over, and over, and over again.
Think of how many times the Beatles songs are played. Each time is money in their pockets.
Create and Online Course
Are you good at math? Are you good at playing an instrument?
There are many people who will pay you to do what you already now how to do. There are a few things you need to do.
- Find what you want to teach
- Make sure there is a market
- Find the people who are in the market
- Create the online course
- Sell it to your market
You can find lot’s of resource online on how to create and make money from an online course. Think about what you are good at and teach it!
Create a Blog
Just like the online course, what are you good at? What would people want to learn from you?
Maybe underwater sign language is something people want to learn about. Well, just set up a hosting account with bluehost.com and create a wordpress site with the name www.underwatersignlanguage.com and you are ready to blog.
You can start a blog in 4 minutes or less using bluehost.com.
BlueHost.com will walk you through everything from beginning to end. Once you sign up, you will have an account where you can set up your wordpress site and start blogging.
The link above for bluehost.com sends you to the blue host website. But it also gives me credit for referring you to them. Each time one of you signs up, I get a kickback from them as a referral. It does not cost you and more, but does let blue host know that I gave them business.
Just about any and all companies out has an affiliate set up to get more customers. Their goal is to get more customers and you are helping them do that.
For a thank you, when you refer a customer to them, the give you a kickback that doesn’t even cost the customer anything.
The company saves money on marketing, gets a customer, customer gets a product they need, and you make money.
A win-win all around.
Cut and Reduce Expenses
Now that you have one income and a budget, it is time for you to find all expenses that you can cut or reduce.
Do you need that NFL Package with your Cable subscription? How about that cable package while we are at it? Do you NEED that?
Call every company and have your rates drop on everything you pay for. Credit cards, cell phones, TV, gym memberships, etc.
I had Dish Network for years but decided it was time to cancel and save money. When I called to cancel they asked why I was canceling.
I said “Because I don’t want to spend the money.”
They asked “How much are you willing to pay to keep the basic package.”
I replied “I told them $10 a month.”
The took it!
For the better part of two years, my TV service has been $11.14 a month with HD, DVR, 180 channels, etc. WINNING!
You can reduce your food costs. Buy food in bulk from places like Costco. Dried and frozen food is inexpensive and lasts a long time. Honestly, it may not taste the best but think of it as a way to save more money to buy more investments which will make you more money.
Possibly sell the expensive car you have and buy an old beater car for a fraction the price. Use GasBuddy.com to find cheaper gas.
Maybe find a smaller home to live in and rent out your large home to someone who wants to spend all that money. Cut luxuries you don’t need. Haircuts, manicures, etc.
Eat at home more often. You pay at least twice as much to eat out than you would if you eat at home.
Only buy what you NEED.
Because your one income is passive and does not depend on the hours you work, your income will vary from month to month.
You need to have an emergency fund as a rainy day account for when your expenses go beyond your income. Our emergency fund came in handy during those three months that I had little to no income from my rental properties.
A good rule of thumb for your emergency fund is to have 4-6 months of ALL your expenses saved in an interest baring account. If your expenses are $3500 a month, multiply that by 4 to get $14,000 saved for a rain day.
I suggest keeping your money where I personally keep my money. Capital One 360. They give generous interest rates for checking and savings. Currently, they give 0.75% for savings. Try to get that at those national big box banks…
Don’t Keep Up With The Jones!
The Jones are the family with all the best things money can buy.
The best cars, best home, best clothes, best vacations, etc. Don’t try to keep up with them buying all the things they buy. You don’t know their financial statement or income. They could be swimming in debt and living off of credit cards.
This is not you. You live off the cash your passive income brings in and save to buy more properties which will make you more money.
A problem occurs when your income rises, so can your standard of living. Most people believe if they get $1000 more a month, their lives will be much easier and they can live debt free. The problem is that with more money, comes more spending.
Don’t spend all the money you have. Live off of one income now to prepare you for the future.
As In Everything, Practice Makes Perfect!
Start living off your one income today!
Because you still have your job, you have the ability to give it a trial run to see what it is like. Doing this will allow you to know what it will be like when you quit.
Create a new account and have your entire paycheck taken out of your account every month. Set it aside and don’t touch it even if life gets rough. Dip into your emergency fund if you have to but leave your job income alone. Do this for at minimum of 6 months to really see the ups and downs one income will bring.
After 6 months, you will have your entire income saved up for the future and know that you can actually quit your job!
If you make $60,000 a year from your job, you could have saved close to $30,000 in your trial run by saving your income.
You can do it!
If you are almost at the place to quit your job, you have already done the hard work. Keep saving, keep investing, and keep cutting expenses. You will be so much happier without your job. Do it. Start today!
For more ideas on how to do this, check out my summary review of the Richest Man In Babylon. This book will knock your socks off on how to live off your passive income.
How are you doing with quitting your job?
Leave me a comment below. I’d love to hear about it.