Half Time: Single-income families need to double savings efforts

More than 3 million jobs have been lost in the last three years, which means that many families have been reduced from double-income to single-income households. Here are some strategies that financial planners suggest to help families survive the single-income phase.

The first step is for both partners to sit down together and make a list of monthly living expenses. The list should be divided into discretionary versus nondiscretionary items. Mortgage payments, for example, are nondiscretionary. Then factor in income. This list will help you create a budget that will tell you what kinds of adjustments you need to make in your lifestyle and expenses.

?There are many expenses involved when both spouses work that may be cut in half or more when one partner is at home,? says Barbara Williams, a certified financial planner who teaches classes in financial management. One of the expenses that evaporates when one parent is at home is the cost of child care, which could range from $5,000 to $12,000 a year. Another saving is on the cost of food. Busy families in which both parents work often spend more than $400 a month on dinners out because no one has the time or energy to shop and cook, not to mention the cost of lunches out during the workweek and coffee purchases, which can quickly add up to $5 per day (or $1,825 a year). With one spouse home, money can be saved by taking the time to shop the specials and cooking from scratch and dining in.

The expense of operating a second car goes down with less commuting. Depending on the length of the commute and the cost of gas and auto maintenance in your area, this could add up to savings of more than $2,000 per year. Another viable cutback when one spouse is at home all day is doing your own housecleaning (about $150 per month). Home improvements, except for essential repairs, need to be put on hold, and entertainment needs to be redefined. Consider cutting back to basic cable service, which could save about $50 a month. Vacations, too, need to be rethought, but perhaps not given up. Instead of the $50 salon haircut, go to the local $10 haircut shop and forget about the fancy fingernails.

Clothing expenses should go down, as should dry cleaning bills, especially if it?s the man who has lost his job because most men?s clothes require dry cleaning rather than laundering at home.

Other strategies include refinancing your house to lower your monthly payments, perhaps even getting an interim interest-only loan to bring mortgage payments down to a bare minimum until the economy turns around and everyone is back to work at the salary they?re accustomed to earning. If things get really bad, you may have to consider temporarily discontinuing paying into your children?s college education fund or contributing to an individual retirement account or 401(k).

Williams suggests refiguring your income tax to make sure you?re not overpaying or underpaying on deductions. If the person who has lost his or her job was the one providing health insurance for the family, Williams advises accepting underemployment or working at a lesser job for a lesser salary if it includes health insurance benefits. Privately purchasing health insurance for a family of four could cost as much as $800 per month.

Establishing a separate bank account for severance pay and unemployment benefits is a strategy that has helped some families, according to Williams. ?The out-of-work spouse created a bank account and kept track of it. He wrote himself a weekly paycheck, which he used to help pay expenses. It made him feel like he was contributing to the family and also made it easier to keep track of where the family was financially,? Williams says.

Maintaining Internet service is one expense Williams advises keeping, since the Internet is valuable for job searches and submitting applications.