Updated: May 18
Living on a single income can often be less than ideal, but is a reality for many Australians. Whether you’re a single parent, starting a family, or facing unemployment, living off one income can be done with solid long term planning.
Only Breadwinner: What is it?
A ‘breadwinner’ is the primary, or sole income earner in a household.
Traditionally, in a two-income household, the breadwinner is the person with the more profitable and economically sound job. However, demographics are changing and today one in four Australian households are a ‘lone-person household’, therefore also falling into the sole breadwinner category.
By far, the hardest challenge for sole breadwinner households is consistent cash flow. Disposable income is generally very tight and virtually every dollar that comes in is spent on essential expenditures with little room for luxuries, let alone savings for the future.
With one income also comes one superannuation fund, making it difficult to save for a comfortable retirement in the future. Add to this the risk of the sole breadwinner falling ill or injuring themselves, these challenges are a common dilemma many Australian households are facing. But they need not face it alone.
3 key considerations for sole breadwinner families:
Whilst this may seem like an impossible achievement for households with a tight cash flow, people are often surprised to learn that crucial covers can be funded through their super fund. Australian’s already have a minimum of 9.5% of their income being set aside into superannuation to secure their retirement, so using a small portion of this whilst you are working to protect your current situation is often a smart decision.
Non-breadwinners are important too
An important consideration often overlooked is some level of cover for the lower earning member in a couple. People often underestimate the time and financial burden associated with having a seriously sick or injured partner, or in the extreme cases the event of a death.
Use your equity
Unlocking the equity in your home to invest is a key strategic area that could be beneficial for many. This can help reduce tax and build wealth without impacting cash flow.
As Financial Planners, it is our goal to help people in all financial situations. A lack of cash flow is quite normal and not a reason to avoid seeking advice for the future.