Suze Orman has this advice for dual-income households

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This is a tip to follow for sure.

Key points

  • Having two paychecks available to you could give you more financial leeway.
  • You may want to consider making changes to your budget to maximize your savings potential.

It’s easy to see why many married couples, or couples who live together, have only one income to work with. For those with children, the cost of child care can be high enough to eliminate the benefit of having a second paycheck.

But what if you are part of a dual income household? Maybe your kids are old enough that childcare isn’t an issue. Maybe you earn a high enough salary to make childcare worthwhile. Or maybe you don’t have kids at all.

Either way, having two sources of income gives you a financial advantage. And right now, there’s one key move you might want to make if this is your situation.

Pretending that a paycheck doesn’t exist

These days, many financial experts are warning that a recession could be imminent. And Suze Orman shares this concern.

The Federal Reserve raises interest rates in an effort to slow inflation. Once borrowing becomes more expensive, consumer spending is likely to decline. This could lead to a series of adverse consequences, such as widespread layoffs. And that’s a reality that Orman wants people to prepare for.

That’s why, in a recent podcast, Orman advised people in dual-income households to make a short-term, strategic move — try to live on one paycheck and save the other. Orman thinks this is a smart idea for several reasons.

First, more emergency savings you have, the easier it will be for you to weather a recession unscathed. If you don’t build up a good amount of reserves in your savings account, you could end up with unhealthy debt if you lose a job and can’t cover all of your bills.

Second, Orman says living on one paycheck might be a good try in case a recession hits your household and you or your spouse/partner are laid off. Finally, living on one paycheck might force you to make smarter decisions about how you spend your money. You may, for example, realize that your cable package and several streaming services aren’t worth paying for when you’re limited to a lower income.

Tips to take

The ability to live on just one paycheck could do wonders for your finances during periods of strong economic growth as well as during downturns. And so it’s a tactic worth trying if you’re able to swing it.

Living on one paycheck is an especially useful exercise if you and your loved one earn roughly the same amount of money. If one of you has a much higher income and you just stop living on the lowest salary, it might not be such an accurate test for a recession – not if the highest income high is the one who is fired.

But even then, banking an entire salary — even a lower salary — is a great way to shore up your savings and protect yourself in case the economy takes a serious turn for the worse. So it’s worth following Orman’s advice, regardless of the salary difference in your household.

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