Living on a single income
By Diana Cawfield • Bankrate.com

As unemployment figures continue to rise, many households face the prospect of living on one income for the first time. For others, living on one salary is a choice and a prime example of the ability to manage one's finances in a two-income world.

Whether you're already trying to manage on one income or you're seeing the writing on the wall at work (think auto industry), there are invaluable lessons to be gained from living on less.

Found money
"There are a lot of two-income families that feel they need two incomes to live because they have got used to having all that extra stuff," says Diane Koven, a Certified Financial Planner, or CFP, at Sun Life Financial in Ottawa.

So when it comes to basic financial planning, Koven suggests that "even if you have two incomes coming in, it would be a good exercise to see if you can live on one."

Smart money management starts by separating essential expenses from discretionary expenses. This is where the lines get blurred for many people. Because once your discretionary spending gets built into your lifestyle, you start believing they're essential.

Whatever your preferences -- the daily coffees, lunches, magazines, the monthly gym fee, spa treatments or eating out -- they become a way of life instead of a choice in life. When it comes to living on one income, it's these discretionary expenses that can make or break a household.

To put those expenses in perspective, tally up the monthly cost and multiple by 12 for an annual total. Just a $3-a-day habit of coffees, lunches or whatever adds up to $1,095 a year.

By jotting down all of your discretionary expenses, you can see where your money is going. "We get so used to having things included in our lifestyle," says Koven, "but a lot of them are not really necessary, and this exercise would make you, at the very least, stop and think about that."

Big cost-cutting options
Laurie Campbell, executive director of Credit Canada, in Toronto, offers some cost-cutting ideas that can significantly reduce your monthly expenses.

"I think one luxury of having one person who's not working is that the person who's not has more time and energy to comparison shop, to make sure they get the biggest bang for their buck," she says.

If you're shopping at a high-end grocery store as opposed to a low-end grocer, you are spending hundreds of extra dollars. "In a given year, it could be in the thousands," says Campbell. "On top of that, if it's a one-income family, often the other person has the time to cook instead of going out for dinner and the savings is immense over time."

Another option that Campbell sees happening with one-income families is paring down to one vehicle. In larger cities, taking public transportation can save hundreds of dollars in gas, insurance and car maintenance expenses.