The Eleven Reasons People Can't Sell Their Homes

The environment for home sales becomes more difficult with each passing month. Some estimates put 11 million mortgages, about 20% of the U.S. total, underwater, meaning that homeowners owe their banks more than the underlying properties are worth. Home repossessions reached more than 100,000 for the first time in September. Rising foreclosure rates continue to further depress housing prices.

The federal government let its tax benefit for homeowners expire in April and has not renewed it since them. The program did boost sales earlier this year. Shoppers must now face a market without the credit in which many home prices continue to fall.


The clamor over flawed foreclosure paperwork and robo-signers could further chill the housing market. People who might buy have bought a home in foreclosure will now worry about obtaining proper documentation and effective transfer of title.

24/7 Wall St. spoke with experts at real estate research firms Zillow.com and RealtyTrac to find the best way to sell a home. We also interviewed management from the National Association of Realtors, a number of real estate brokers, bank managers and elected officials in affluent communities. What emerged from these conversations and our research is the following: successful home sellers often do the same small number of things correctly. Often, these tactics are the difference between finding a buyer and not.

1. Pick the Best Broker

Many people who decide to sell contact a real estate brokerage with a sterling reputation or go to one that has the largest number of listings. Frequently, when potential sellers call these firms, they are turned over to the first available broker in the office. That person is often not the best representative. As a matter of fact, what is a successful broker doing in the office anyway? There are a small number of brokers in most markets who have a better track record than their peers. Most of them have been brokers for a long time and did not lose their jobs when the housing bubble collapsed.

2. Get an Appraisal

Sellers should obtain an appraisal for their home before they put it on the market. One of the major reasons house sales fall apart is that the bank assesses the home for less than the buyer has agreed to pay. For example, a buyer and seller agree on a price of say $250,000. Then the buyer goes to his bank to get a mortgage. But, the bank appraises the house for $200,000. Now, the buyer has to put up more money. Sellers who get their own appraisals get a realistic idea of what price a bank would value a house at before they enter into a sale. Most appraisers already do some work for banks. An appraisal often tells a seller what a "safe" price is. And an appraisal's average cost is only about $200.

3. Get the Right "Comp"

Sellers must make sure that foreclosures in their area are included in the "comps" the Realtor gives them. Traditionally, a broker will give a seller a list of similar properties in the market and that information is part of what is used to set a price. What brokers do not always do is put the price of any foreclosed properties that are comparable into the calculation. A typical foreclosed home sells for 25% to 30% less than similar inventory in the same area. If sellers don't take that into consideration, their home will not be priced competitively and they put themselves at a disadvantage. Sellers wind up slashing prices after their overvalued properties are on the market for several months without success.

4. Tax Assessment

Low property taxes are critical to finding buyers. Property taxes in most cities, towns and counties have gone up for years as home values appreciated. This revenue is used to run schools and other local services. However, now home values have dropped sharply, and the appraisals by local authorities on which taxes are based are too high. Many cities have a process for homeowners to request lower appraisals, and as a consequence obtain a reduced property tax. Some states even have a board of appeals for homeowners who do not think they were treated fairly. One way for people to get local authorities to cut the tax assessment of their home is to put it on the market at below the appraised price. If the home does not sell for several months, they can present empirical evidence of the lower value. A home assessed for $300,000 that goes on the market for $275,000, but does not sell for a year, is probably not worth $300,000.

5. Conserve Utilities

Turn the lights off! Most buyers ask for utility bills. "Energy wasters" who sell a home will rue the times they forgot to turn off lights, turn down the air conditioner or left the TV on all day. It would be ill-advised to fake the amount of energy being used by simply living in the dark and cutting utility costs to nearly zero. However, careful and prudent use of energy can cut bills by enough so that a buyer does not have sticker shock about what it costs to maintain electricity, gas or oil to run a house.

6. Sell "Green"

Not very many homes are actually built with environmentally friendly material or heated by solar panels or wind. But those that are have a special appeal to the crowd that buys green cars such as the Prius. A seller may have one of only a few "green" homes in their town or city. That may make it highly desirable to many shoppers.

7. Curb Appeal

This item appears on most lists, and many sellers don't bother to take the advice to prune the hedges or clean the gutters. But it is even more complex than that. Walk to the road on which your home is located. Now walk toward the house. What does a buyer see for the first time? Most sellers never bother to look at their homes through a buyer's eyes. Do the shingles need a paint job? Are the shutters looking shoddy? "Love at first sight" is no less rare with homes than with people.

8. Everything Is Negotiable

Negotiate the fee with the broker. The fee paid to a Realtor for selling a home is traditionally 6%. Sellers often believe that they can get that down to 5% or even 4%. But, in a market where brokers are desperate for business, pressing for 3% or even 2% may work. Whatever the savings are, they can materially affect how much a seller can drop the price of his home and still walk away with a profit.

9. Get an Inspection

Sellers should do some of the inspection work and testing before their home goes on the market. Inspectors for buyers are often aggressive when they report what is "wrong" with a home to their clients. For as little as $250, an inspector will go through your house and tell you what the inspector is likely to flag such as a roof leak or old, energy-wasting windows. That gives the seller a chance to fix the problem for less than the buyer may want to lower the price by, or at least know the items that a buyer will use to negotiate down the price.

10. Hire a "Stager"

For as little at $200, you can hire someone who can make your home look better by moving pictures, furniture, lights and addressing problems that may make the home show poorly. These people are cousins to the men and women who "fix" expensive homes before magazines come in to photograph them for stories. "Stagers" have lists of tricks that few Realtors and almost no homeowners know. The "better" your home looks, the more appealing it will be to potential buyers.

11. Fix It First

Sell a house that does not need any work. In a market in which people count every penny and worry about job security, fewer buyers want homes that are "fixer uppers" that require work that could cost thousands or even tens of thousands of dollars to address. These days, a buyer choosing between two homes will most likely take the one that needs the least work. It may cost some money to get your home to the point where a buyer can walk in and do almost no work. However, it may be the difference between selling a home and having it languish on the market.

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15 Ways to Tell if You Are Ready to Retire

It can be difficult to determine if you are prepared to permanently exit the workforce. You need to save enough to last the rest of your life--and you'll need to manage that money to beat inflation and minimize taxes. Retirees should also have a plan for remaining connected to others and staying relevant in this new life stage. Here's how to tell if you are ready to retire.


Establish a Retirement Budget



Retirees no longer have to pay for professional work clothes or transportation to the office. But unless you enter retirement newly mortgage-free, most of your other expenses are likely to remain the same after you leave your job. "I don't find that people's expenses go down in retirement," says Leisa Brown Aiken, a certified financial planner for Veo Financial Counsel in Chicago. "You're probably going to spend as much or more as you spend now." If you plan to travel or take up new hobbies, your expenses could even increase in retirement.

Examine Your Cash Flow

Most retirees receive income from several sources, including Social Security, pensions, investments, and increasingly, a part-time job. You need to make sure you will receive enough income from these or other sources to pay all of your monthly bills. Less common sources of retirement income include home equity, annuities, insurance, royalties, and rental income.

Size Up Your Nest Egg

How much you need to save for retirement depends on what your retirement expenses are and how much income you have coming in from other sources. Your savings needs to fill in the gap between your monthly living costs and your Social Security, pension, and other guaranteed sources of income. Retirement savers should estimate how long they will live and take steps to protect that money from inflation. Donald Duncan, a certified financial planner for D3 Financial Counselors in Downers Grove, Ill., says healthy baby boomers should plan as if they will live until at least age 90, and perhaps 100.

Develop a Withdrawal Strategy

Retirees need a plan for drawing down their assets. Most financial advisers say that you can safely spend 4 percent of your nest egg each year. Withdrawals from tax-deferred retirement accounts become required after age 70 1/2. The withdrawal amount is calculated by dividing your IRA and 401(k) account balances by the Internal Revenue Service's estimate of your life expectancy. The penalty for failing to take out the correct amount is 50 percent of the amount that should have been withdrawn, in addition to regular income tax.

Minimize Taxes

Your entire nest egg isn't available for spending in retirement. When you take money out of tax deferred 401(k)'s and IRAs in retirement, regular income tax is due on the withdrawals. If your tax bracket fluctuates from year to year, you can time your retirement account withdrawals to minimize taxes. "Do withdrawals or convert to a Roth when you are in a low tax bracket and, if you can, withdraw less when you are in a higher tax bracket," advises Aiken.

Maximize Social Security

Retirees can sign up for Social Security beginning three months before their 62nd birthday. But annual payments increase for each year you delay claiming until age 70. Seniors who sign up at age 62 get smaller payments over a longer period of time. But retirees who delay claiming will get higher payments in old age when they are less able to work and more likely to develop health problems.

Get Health Care Coverage

Many people delay retirement until they become eligible for Medicare at age 65. Sign up right away to avoid a Medicare Part B premium increase of 10 percent for each 12-month period of delayed enrollment. You'll also need to shop around for the Medicare Part D plan that best meets your prescription drug needs. Those who retire before age 65 need to have a plan to purchase health insurance. Consider whether your employer provides health coverage to retirees, you are eligible for COBRA coverage, or will need to purchase your own individual policy. Health insurance exchanges will become operational in 2014.

Prepare for Long-Term Care

Retirees need to consider the possibility that they might need long-term care. Medicare pays for up to 100 days of nursing home care, but a prolonged illness or chronic condition could require care for a longer period of time. Purchasing a long-term care insurance policy is one way to shield yourself from high chronic care costs, but these often expensive policies are not appropriate for all retirees. The health reform bill created a voluntary government long-term care insurance program, Community Living Assistance Services and Supports (CLASS), which will begin in January 2011.

Consider New Activities

Plan to embrace a new activity in retirement. "You have to be mentally ready to not go into the office anymore," says Duncan. "You need to have something to replace the time that you spent working such as a hobby or travel." Consider volunteer work, taking a class at a local college, or a part-time job.

Join a Social Circle

When you leave your job, work-related social functions and lunches with coworkers often stop. "If your whole social life is tied up in your work life, it is a difficult transition," says Warren Ward, a certified financial planner for Warren Ward Associates in Columbus, Ind. Try to make friends or join a social circle outside of your company before you retire. "Very often, people will find a hobby or two, volunteer at the library, or become a boy scout leader because it introduces you to a new social circle," says Ward.

Coordinate With Your Spouse

Retirement may change your relationship with your spouse. Perhaps one spouse is ready to retire and the other wants to continue working. Even if you retire together, you may have to renegotiate responsibilities and boundaries. "The act of retirement itself can put a strain on a marriage because they were both working or one was working and one was home and now they are both home at the same time all day, " says John Migliaccio, director of research for MetLife's Mature Market Institute. "Negotiating retirement with your spouse is very important." Sure, you'll be able to take lingering walks on the beach in retirement, but you also need to decide who mows the lawn and who unloads the dishwasher now that neither of you is working.

Pick Out a Place

Once you're no longer tied to your job, you're free to move anywhere you wish. Frugal retirees can downsize into a smaller home or condo or relocate to a low cost area of the country (college towns often offer a low cost of living and plenty of amenities.) Many seniors move to sunnier climates and never shovel snow again, and some choose to move closer to their grandchildren.

Keep Your Emergency Fund

Although the fear of losing your job disappears when you retire, the need for an emergency fund doesn't. Retirees still get leaky roofs, broken-down cars, and other large and sudden expenses. "It makes sense for retirees to have a fund of cash of some kind, one to three years' worth of money that they will need in addition to Social Security, and keep that in something really safe," says Aiken. "It's your short-term spending money." Keeping your emergency fund in an FDIC-insured account will allow you to delay withdrawals from investment accounts in years when the stock market performs poorly.

Pay Off All Debts

Pay off as much debt as you can before you retire. "In general, people should have all their debts paid off when they retire," says Aiken. "If you have no mortgage you have more flexibility when things happen."

Take a Practice Retirement

One way to tell if you will enjoy retirement is to test it out by taking an extended vacation or leave of absence from your job. "Very often, people who are used to working really hard are just lost when they don't have some place to go," says Ward. "Their value in their own mind is being part of the workforce and going in and solving problems for people every day." Find out if you will enjoy hours of free time and lingering lunches or if you'll crave work to structure your days. "We encourage people to take a leave as an alternative to retirement as a chance to sample it," says Ward. "Consider what you want to do next and what you are going to give up."

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How to Make Your Money Last in Retirement

People are living longer and saving less. But there are ways to stretch out your dollars.

If you're like many people, you've put considerable time and effort into socking away money for retirement. But you've probably put less thought into how slowly you'll spend the money and in a way that will make it last--a potential disaster.



A perfect storm has foisted this challenge upon individuals. People are living longer. Fewer have pensions. Instead they have 401(k) plans that may have been decimated. Assets in savings accounts may actually be losing value thanks to short-term interest rates that are actually lower than the inflation rate. And Social Security seems iffy for younger workers.

There are steps you can take to make your money last. Spend less and work longer, of course. But even then you can't know how long you're going to live. All you have are the odds: for a married couple at age 65, there's a 58% chance one person will live to 90; a 50% chance one will live to 92; and a 25% chance one will live to 97.

William Wixon, owner of Wixon Advisors, advises many Minnesota clients to plan for a retirement of 30 to 35 years. How can they make their money last that long, or longer? Let's say you're 65 years old, want to retire now, and expect to need $100,000 annual income in retirement. You'll need to adjust that $100,000 to rise with inflation because, as Wixon says, "What's a loaf of bread going to cost in 30 years? Maybe nine bucks." Here are some options for you, with pros and cons.

Savings Accounts

If you have a Depression-era mentality, put your nest egg in savings accounts and certificates of deposit with no more than the FDIC-insured limit of $250,000 in any one bank. It's safe and will be there for you no matter how the markets do.

Unfortunately such low-risk investments may lose value over time after inflation and are unlikely to generate much income. If you have a pot of money to get you through your golden years, the most that can be withdrawn over a 30-year period is 5% (some people say 4%) per year, adjusted for inflation. At current interest rates of 2% or so, you'll need to start with $5 million to generate $100,000 a year in income. But that doesn't allow for $100,000 to grow with inflation, so plan to draw down that $5 million over time.

A Balanced Portfolio

If you don't just happen to have $5 million lying around, you'll need to take some more risk to have any chance of generating that $100,000 a year you desire. One alternative is to put money in a diversified portfolio of stocks, bonds and real estate that pays dividends. If you start with $3 million and the market performs as it has over the past 70 years, you should be in good shape. But if the market lags or companies cut their dividends, your money might not last.

A recent white paper from Vanguard Group discusses making systematic, fixed, inflation-adjusted withdrawals from a balanced mutual fund of stocks and bonds. Adjusting your withdrawals based on the inflation rate might reduce the risk that you'll run out of money, but it won't eliminate it entirely.

Immediate Annuities

With an immediate annuity, you put money in an insurance contract that usually pays a fixed rate of return (much like a certificate of deposit) and start receiving payments within a year. How much income your lump sum will generate depends on how much you invest, your gender and age at the time you buy the annuity, as well as the prevailing interest rate environment (currently unfavorable to annuity buyers). A 65-year-old woman living in Illinois would need to plunk down about $1.5 million to generate $100,000 in inflation-adjusted annual payments for life.

It pays to comparison-shop for immediate annuities, especially among low-cost vendors like Vanguard and TIAA-CREF. Also consider tailoring the annuity, for example, by arranging for payments to continue until both spouses pass away.

One downside is that an immediate annuity ties up your money, so you won't have access to it in an emergency or to pass on as an inheritance if you get hit by a bus the day after you buy it. It also locks into the prevailing low-interest-rate environment. You can get around this by buying annuities in chunks over several years. To lock in real, after-inflation income, opt for an inflation-adjustment rider, but understand that it will cut into how much you'll receive each month.

Deferred Annuities

With a deferred annuity, you pay now and hope to accumulate assets through either a variable product that invests in equity mutual funds or a fixed product that offers bond-like returns. How much you'll receive each month when you start to draw down your annuity will then depend on how your variable or fixed investments do over time.

Putting aside money this way may encourages you to save for retirement. But it may also come at the cost of hefty surrender fees or penalties if you decide you need to tap your savings prematurely.

Another reason to consider deferred annuities is that they enable you to continue saving tax-deferred after you've maxed out your 401(k) and your IRA. You will still have to pay taxes as you withdraw the money. Unlike with an immediate annuity, if there's a balance when you die, it goes to your heirs.

The downside of deferred annuities are the lockups and often exorbitant fees. You pay an average of 2.15% a year, according to one study, and you could pay up to 4% annually in fees. Unless the tax deferral is truly important, you might be better off investing in tax-efficient mutual funds or ETFs until you need the money, and then converting it into an immediate annuity. It's not risk-free, but it may save you a lot of money in the long run.

Guaranteed Lifetime Withdrawal Benefits (GLWBs)

Many deferred variable annuities buyers avoid the risk of out-living their savings by paying for guarantees that payments will last until they die. That's one way to guarantee your $100,000 annually lifetime income will continue (as long as the insurer remains in business).

Unfortunately $100,000 will not buy in 20 years what it does today. Cost-of-living adjustments come at a price of about 1% per year with GLWBs. That's on top of the cost of the annuity and the underlying investments. Add it up and the cost could come to a pricey 5% in all. If you tap your money for an emergency, you risk blowing up the guarantee. If you still want the product, prepare to shop with professional assistance because insurance companies seem to go out of their way to make GLWBs confusing.

Reverse Mortgage

If all your planning comes up short a reverse mortgage might help you make ends meet. It is essentially a specialized home-equity loan available to people 62 and older that lets you borrow against your home equity and collect the money as a lump sum or as regular payments for as long as you live.

The advantage is this lets you tap equity in your home without having to meet any income guidelines or make immediate payments, as you would with a home-equity loan. Unfortunately costs are high, and when you're gone your heirs might have to give up the family home to pay back the reverse mortgage.

If your home loses value, any shortfall against the loan is the Federal Housing Administration's problem. But remember, you still have to pay taxes, insurance and upkeep on your house. And it won't provide $100,000 for long. The maximum loan you can get in most cases is some percentage of $625,000, based on your age. Hopefully that will last you.

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How to Do Estate Planning on the Cheap

You could use software to write your own will, but here's a safer alternative.

Yes, it can be painful to pay for estate planning. Lawyers charge a lot. The benefits of a plan are delayed, and you don't live to see them anyway. Who wants to spend big bucks on a plan when times are so tough and the federal estate tax is in flux?

Fewer and fewer Americans, it seems. Only 35% had a will in 2009, and only about half had any estate-planning documents at all -- a will, a trust or a financial or medical power of attorney, according to a survey by Lawyers.com. That's a drop from previous years.


What about do-it-yourself planning? In theory, you can use books or software and websites that spew out documents for free or for a fraction of what lawyers charge.

There's a decent argument that doing something on the cheap is better than doing nothing. If you die without a will ("intestate," in legalese), state law will determine how most of your belongings are distributed, and it may not be in the way you'd want. If you're a single or surviving parent who dies without a will, the court will decide who should raise your minor children. And certainly, before you're wheeled into the operating room, it's better to have signed living-will and medical power-of-attorney forms -- even if you haven't consulted a lawyer.

The trouble with do-it-yourself planning, however, is that even if your situation seems simple, there are many oddball things a layman wouldn't think of that can go wrong, especially with a will. These mistakes can end up costing your heirs a lot more than you saved in legal fees.

Example: Fort Lauderdale lawyer Joanne Fanizza recently handled the estate of an elderly Florida woman who had a guy (not a lawyer) in her condo building write her will. He worded it in such a way that her estate lost "homestead protection" -- meaning protection from her creditors -- for her condo. So even though she had no debt, her kids had to sit out Florida's 90-day creditors' claims waiting period before selling the condo. "The real estate market was falling, and every day cost them money in lost value," Fanizza reports.

To be sure, not every will written without a lawyer leads to a horror story and some written by lawyers go awry, too. But owning a home, being married or having children complicates estate planning and increases the risk of foul-ups. And with the federal estate tax scheduled to come back next year for those who leave behind more than $1 million, minimizing Uncle Sam's bite will be a concern for many more people. (Plus, 19 states currently have their own estate taxes, and some of those kick in at fairly low asset levels.)

Here's another alternative: Capitalize on the fact that lawyers, too, are relying on software and find one who will prepare documents for you cost efficiently.

We've listed below five key estate-planning documents, rough low-end costs for having a legal pro prepare them and some of the value a lawyer might add. Each estimate is based on an hourly rate of $300 (although some estate lawyers charge as much as $1,000) and covers the document, a brief consultation and help spotting pitfalls or opportunities unique to your situation. The prices assume the matter is simple enough to take minimal professional time and that the lawyer uses software.

Jonathan G. Blattmachr, a retired partner of Milbank, Tweed, Hadley & McCloy and founder of the Melbourne, Fla. company InterActive Legal, which sells software for estate lawyers, helped us determine how much of an attorney's time would be involved under those conditions. He notes that a lawyer who prepares your will and perhaps a life insurance trust might throw in the other, simpler documents listed here for free or for a nominal additional cost. So it pays to negotiate for a lump-sum price. You should be able to get the whole package for $1,200 to $2,000, but don't be surprised if some lawyers ask for $4,000 or more. If, after reviewing this list, you still want to use do-it-yourself software, then consider hiring a lawyer to review your self-prepared documents. Figure on paying for one to two hours of his time at $300 an hour.

Basic Will: $600

As the cornerstone of many estate plans, a will should transfer assets, appoint a guardian for minor children and name an executor or personal representative -- the individual or institution that takes charge of your estate after you die and distributes property as you specified.

Value added: This is the document most fraught with land mines, some of which only an experienced lawyer can spot. One problem that can arise with DIY products is inadvertently cutting a family member out of your will. For example, some DIY software automatically disinherits a special-needs child if you answer yes or no questions a certain way. (If you have such a child, get professional help with your estate plan.) A more common trap goes something like this: Mom wants to provide equally for her three children. Shares in GE constitute a third of her estate. So she leaves the stock to one child and the rest of her assets to the other two. Several months before she dies, she sells the stock. The child who was supposed to get it receives nothing. If the other two siblings want to even the score, they could end up owing gift taxes.

Irrevocable Life Insurance Trust: $600

This trust is created to own a life insurance policy. Why use a trust? If the insured owns a policy on his own life, the insurance proceeds become part of his taxable estate. Your heirs can own insurance on your life directly, without using a trust, but not if those heirs are minors.

Value added: Though simple in concept, this trust requires careful execution. You can put money in the trust to pay insurance premiums using the "annual exclusion" -- a provision that allows anyone to give anyone else $13,000 a year. But the annual gift must be of a "present interest" -- something the recipient can use right away. To satisfy this requirement the beneficiaries of an insurance trust (or their parents, if the beneficiaries are minors) are usually given what's known as Crummey powers--the right for a limited time, usually 30 or 60 days, to withdraw from the trust the yearly gift. The lawyer can supply a sample letter, called a Crummey notice.

To keep the lawyer's cost low, consider in advance whom you should name as an independent trustee and a backup trustee. Think, too, about other issues, including the timetable for distributions from the trust and how much power the trustee will have over distributions.

Durable Power of Attorney: $150

This document appoints a trusted family member, friend or adviser as an agent to act on your behalf in a variety of financial and legal matters if for some reason you can't. Typically this is a concern of older people, but much younger people can also be incapacitated.

Value added: A lawyer can help you determine what rules apply in your state and whether, if you own real estate in more than one state, you will need a power of attorney in both. Other issues you might discuss: What powers should be included (for example, the power to make gifts or create a trust)? When should the document take effect?

Health Care Proxy: $75

Also called a health care agent or health care power of attorney, this authorizes someone to make medical decisions on your behalf if you can't.

Value added: The form, which varies from state to state, is generally not complicated to fill out. But if you're not sure whom to choose as your agent, you may want to discuss it with a lawyer. Whether you do this yourself or not, Blattmachr recommends signing four copies of both this document and your living will. Keep one yourself and give one each to your health care agent, your primary physician and a trusted adviser.

Living Will: $75

This expresses your preferences about certain aspects of end-of-life care, rather than simply leaving decisions up to the person named in your health care proxy.

Value added: A lawyer who has witnessed life-or-death decisions with other clients can facilitate conversations about this difficult topic. Bernard A. Krooks, of Littman Krooks in New York City, was meeting with a couple when the husband stepped out for a moment. In his absence the wife confessed that she couldn't follow her husband's wishes to pull the plug -- she would keep him alive under any conditions. Krooks disclosed that to the husband, who named an adult child as his medical agent instead

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How to Become a One-Income Family

It's no myth: More couples than ever are relying on two incomes to get by.

According to the Families and Work Institute in New York, 79 percent of today's married couples have both people in the work force, up from 66 percent in 1977.




But at some point, life happens — you start a family, go back to school or face a layoff — and this new reality may force you and your partner to question whether you're ready to jump off of the dual-earner treadmill.

While there are steep odds to overcome, living with only one family income can be done with thorough planning and a willingness to make choices





Get on the Same Page With Your Partner


It is critical to have a frank conversation with your spouse about why you're making the choice to live on one family income.

"Be sure to talk about all aspects of this decision, making sure this is a comfortable, mutual agreement," says Judy Lawrence, a financial counselor in Albuquerque, N.M., and author of "The Budget Kit: The Common Cents Money Management Workbook."

Feelings of ownership over money can be a thorny issue for one-income families, as the spouse earning the money may feel more entitled to spend it. Establishing a personal allowance for both partners can reduce those feelings, says Ben Gilbert, a Certified Financial Planner with Silver Oak Advisory Group in Portland, Ore.



Carefully Map Out Your Budget


Don't resign yourself to an all-ramen noodle diet without first setting a detailed budget for living on one family income.

"Once a couple can see what their obligations are, they can look at that list and determine what they give up," Lawrence says.

Beyond the mortgage and groceries, the budget should also include less obvious expenses such as life insurance and disability coverage, Gilbert says.

Set spending priorities and adjust your budget accordingly, Lawrence says. Should you give up dining out, or weekend entertainment, or both? Re-evaluate fixed expenses such as cable, cell phone payments and monthly subscriptions.





Trim Big-Ticket Items First


Forgoing a few lattes probably won't make up for the loss of an entire paycheck.

Trimming costs on housing, cars and other major monthly expenses will free up the most room in your budget. But this is the tricky part, as costs of living for necessities have risen drastically in recent decades, says Lois Backon, senior vice president of the Families and Work Institute.

Still, it's not impossible. "There are lots of surprising ways to lower housing expenses," she says.

Because selling a house in a depressed market might not be feasible, Backon suggests exploring nontraditional living arrangements, such as renting out a room.

Cars are another major expense, and it might be worth selling a vehicle if one person won't be commuting, Backon says. And clear off any credit card debt or other monthly bills that might prove cumbersome later as a one-income family, she says.



Say 'So Long' to the Joneses




With most of today's couples pulling in two paychecks, many of the trappings of today's modern family — the bigger house, new cars, dinners out — are the result of a two-income lifestyle.

Don't expect to have all of those things if a single-family income is your priority, Gilbert says.

"You need to have an open discussion with your peers and say, 'We really can't afford to go out to restaurants and do these other things because we've chosen to live this one-income lifestyle,'" he says.



Don't Cut Back Too Much


Don't fall into the trap of eliminating long-term savings, Gilbert says.

"Because the retirement savings isn't immediately tangible, it's very appealing for a lot of folks to cut back on it," he says.

The same goes for discretionary spending. Ever go on a super-strict diet and entirely deprive yourself of certain foods, only to take a hard fall off the wagon? That's what too much cutting can do, Lawrence says.

If dining out or coffee is a priority or a networking tool, it might be better to cut other things from the budget, she says.



Recast Your Savings Strategy


Just because you plan to live on one family income doesn't mean you have to give up that other paycheck.

Keeping two incomes but relying only on one for living expenses can open up a world of savings opportunities for things such as starting a business, planning for retirement or building a cash reserve in case of a layoff, experts say.

"A lot of people use one income for the necessities — the actual mortgage, the transportation expenses, the food," Backon says. "Then, they use the other income for things they could at some point do without."

[When You Can Save Money by Spending More]



Give it a Trial Run


Practice what it's like to live on a single-family income for a while, especially if you don't have a sound budget to begin with, Gilbert says.

"The best way to do this is to pretend you don't have the money," he says.

Gilbert advises setting up an automatic transfer from the bank and withdrawing the entire second paycheck so you don't even see that money for a year. Then put the cash toward a secondary goal such as savings or a vacation.

"In this day of instant gratification and unbelievable media pressure to spend, this ability to save and to make lifestyle adjustments is more powerful than anyone really realizes," Lawrence says.

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