Budgets Do Not Discriminate
The low-income budget question caught my eye as it’s not the first time I’ve been asked so here I am sharing my thoughts with all of you. It has been a while since I went into my mail bag and a few days ago one fans question touched me to have her reach out to me the way she has. Many people are in the same position as this reader so I hope I can shed a bit of light on the topic of budgeting and low-income families for those that are reading today.
This is one of those touchy topics so please bear with me as I realize many people are struggling through tough times. Debt is debt, money is money, a budget is a budget. I know all of you have unique situations just like we do. I don’t claim to be a budget hero, just a guy who wants to listen and share what we do with our budget. Nothing is easy, we fail, we get right back up again.
Dear Mr. CBB
I’ve read your blog for a while now as I was searching for some family budget information and a sample family budget so I can start to budget for our family. We come from a low-income Canadian family which we feel is at the poverty level in Ontario. I grew up living in poverty but poverty today seems much more difficult as an adult than when I was a child living with my family.
We rent an apartment since we can’t afford to own a home as our credit is not good enough and we don’t have the money for a down-payment. We have a low-income for a family of 3 which includes our son who is 6 years old. I work part-time as I struggle to find work as I need more skills and my husband works full-time in a retail capacity. He also has no further education after grade 12. We take the bus to work since we can’t afford vehicles and walk everywhere else we need to go.
My question is what is a typical family budget and how do I start to budget with a low-income in Canada when we make just enough to cover the bills?
Thanks for any tips.
The current unemployment rate in Canada as of July 2013 is 7.2% and when people aren’t employed that’s a high enough number when they have to exhaust all means and then rely on employment insurance which we graciously pay into and the social assistance/welfare system just to survive.
When I moved to Canada from the UK finding a job was just as tough back home as it is here in Canada for many including myself at the time. Everywhere you looked people were graduating with degrees but weren’t finding jobs so they ended up working in factories or anywhere they could make money to pay the bills. It’s no different in Canada but I believe we have more opportunities here than back home.
Low-income families and education when it comes to budgets is very important and not just for people on a low-income because a budget does not discriminate. A budget is a tool for everyone to educate themselves about how they are spending and saving the money they earn. According to Stats Canada as of 2011 8.8% of the population of Canada was sitting in a low-income status after tax.
What is minimum wage in Ontario?
Minimum wage is the lowest wage rate an employer can pay an employee. Most employees are eligible for minimum wage, whether they are full-time, part-time, casual employees, or are paid an hourly rate, commission, piece rate, flat rate or salary.
Minimum wage in Ontario for 2013 is $10.25 an hour which means that if you worked 40 hours a week after taxes you would net $410 a week or approximately $21,320.00 per year (based on 8 hours a day and a 260 work days for the year) according to Canada Minimum Wage although keep in mind this not net and taxes still need to be deducted.
What is a typical budget?
To answer this question is difficult as I believe everyone has their own way of setting up a budget according to their income and debts but typical does include some basics. The basics include fixed expenses which are expenses that are virtually the same every time you need to pay them (ie. rent). There is also variable expenses which you can expect to fluctuate month after month or when the bill is due (clothing, water bill, gas, cell phone, etc).
Every month on Canadian Budget Binder I post our actual budget for 2 people which is more than a sample it’s all our actual figures which you can look at to see how we manage our money. One thing I like to point out from the start is that if you are married or in a relationship you must learn to budget as a couple. It doesn’t matter who does the work but you both need to be on the same page, or it will fail.
You also need to know what you want money for? Why are you both going to work hard at budgeting your finances for the family? So what are your goals and objectives? I’ve also designed an excel budget spreadsheet which you can use if you like, that is if you feel it is what would work for your family. I often suggest to fans that want to start budgeting to read my budgeting series since that is how it all started for us. There are free budgets all over the internet you just need to find one that suits your needs or you can create your own using a pencil and paper or like we use, the spreadsheet.
In October 2012 I participated in The Welfare Food Challenge where I had $26 to spend for the week on groceries. Although it was tough, I made it through and I did budget my grocery shop for that week. I often think that starting with the grocery budget is a great way to get your feet wet in the budgeting world since food is a necessity in our lives and the budget. Some families spend more on food each month than they do on their rent or mortgage. One fan went from spending $1100 a month to $600 a month in a short period just by using tips found here at Canadian Budget Binder and other popular websites. If you surf my website you will find all sorts of frugal money-saving tips and some amazing blogs that I follow and I hope you can visit to learn more about money management.
A budget for families no matter what your income level can give you the peace of mind knowing that you are paying your bills on time, you know how much money you have to designate to the budget categories and potentially less stress because you know the money is there to pay the bills.
If you aren’t making enough money to cover your debt and basic living needs then you need to make some decisions. If getting a second job will help, then so be it, Alternatively you could always learn some part-time courses if you can save the money to go back to school or manage to get an OSAP loan. Going to school might mean you can find a higher paying job down the road. When it comes to a budget for families the final numbers are going to be up to you although not everyone has the luxury to go out and earn extra money especially if health issues are a set back. Life is funny that way but we have to make the best of what we are given because someone, somewhere does in fact have it worse than us. Be positive for all that we have.
How to budget if you are on low-income?
Well, if you are not making lots of money or enough to cover the bills then you have to ask yourself if any of your variable expenses you can let go of or cut back on? That means no more eating out, no cell phone or try pay as you go, no cable or a cheaper package (negotiate with your provider), no holidays or maybe enjoy a stay-cation or limit to surrounding area etc. The hardest part about being on a budget is living through the budget itself. You can’t keep making excuses every time you make a purchase because the budget will not be kind to you nor will the bill collectors who want their money. We tend to put all of our purchases on credit card as we know our budget inside out and pay the bill at the end off the month.
If you don’t own a credit card or you are not confident in paying one in full, use cash/debit only. You can put together a cash envelope budgeting system that works for you. No guessing, no monthly credit card bills just plain old cash. Just because someone is low-income doesn’t mean they can’t use a credit card or they are irresponsible with money, it has nothing to do with that. Consumer debt, is another story.
Our breakdown of budget expenses below gives you a general idea what percentage of our budget we put our money into. So you start with 100% and parts of your budget categories will fit nicely into each of these sections except for projected expenses unless you save for them which I believe everyone should who budgets. The money has to come from somewhere for those bills that come every so often. We call these projected expenses in our budget and is step 10 in my budgeting series. If you tell me you can’t budget in the projected expenses that means you are spending too much then. If you use projected expenses you need to decide what percentage value you will give to that category. The bill may not be here yet, but it will be so it’s not invisible.
If you don’t save a portion of that bill every month you WILL have to find the money to pay for it when it comes in. If you find that your percentages are higher than what is suggested below you should make changes to your budget as you may be spending more than you earn. The numbers will give you your answers once you track your expenses for a few months.
No budget will EVER work if you spend more than you earn. I’ve had fans who only make $3000 a month net yet they set up a budget with potential expenses of $4000. Sadly, it doesn’t work that way. It has to balance or you spend less, full-stop. There’s no magic that will make it go away unless you make more money or spend less.
The grocery budget
The grocery budget besides rent or mortgage is always another huge expense so I would suggest that you join us here at The Grocery Game Challenge and post your grocery shops for a few months so you get an idea of what you are spending your money on and how much you are spending. It’s not until you actually see it, that you believe it. From there you can start to cut back, and in the mean time you can start meal planning, using flyers, coupons if you can any way you can cut back without compromising your health and well-being.
I’ve got a free recipe index of delicious frugal recipes and treats (yes we like to splurge on treats) that you have full access to so check it out and try some of the recipes. If you are on a restricted diet then search the web as there are millions of blogs and lots of information for you at your fingertips. My wife is on a low-gi diet so we’ve had to modify our budget for this reason but it hasn’t affected it too much. If you want to print out meal plans, shopping lists, pantry inventory lists, and so much more take advantages of the free money-saving tools I’ve put together for you as well.
No one says you have to eat all convenience type food, I didn’t when I did the one week challenge so if you really want this, you can do it. If you are not sure how much your grocery budget should be the easiest way is to fill out the budget spreadsheet once you know your net income and have all the bills and debts you owe in front of you then transferred to the budget. The numbers should all fall into place and you will clearly see where you need to make changes.
Making extra money
I know making extra money for some people is simply not an option but if you do have some spare time then don’t waste it watching tv all night, make some cash if you can. The lovely Katrina who writes for me here at CBB, she’s a single mom on a mission. She has been doing whatever it takes to look after herself and her 2 children as a single parent. She earns extra money using her landscape and gardening skills which helps her immensely and she’s a proud mom. Another fan turned her life around after drugs, alcohol, divorce and debt and now she makes jewellery on the side for extra cash. Don’t give up, don’t think negatively, push, push until you have no more go in you, but if you give up then you have only yourself to answer to.
How to make extra money
Some ways you can make extra money may be working over-time, working part-time at a second job, baby sitting, cutting lawns, shovelling or using skills that you may have in a trade mechanic, hair dresser, plumber etc. If your kids are old enough teach them money lessons by starting a paper route. Let them be responsible for earning their own spending money. It was my first job growing up and what really got me interested in money in the first place.
There should be help for low-income families in your community if you just ask and if you find there is not then surf the web read books from the library and network with others who may be in the same situation. Do whatever it takes to get yourself back on track working towards a safe place that you want to be in financially.
I’m sure many of the fans who read this post and your question will have plenty more to add and I hope they do. If we open our hearts and give back by helping others we make the world a better place one step at a time. Be part of that movement because with movement it brings peace if only your own inner peace, like it brings to me. I want to hear what everyone has to say and I hope we can give you a bit of motivation to jump on board the budget bandwagon today. Most of all, never give up hope.
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