July 22, 2020 | By: Helen Ramlal

The 12 Best Budgeting Tips for Lower Income Families

Low Income

We can tout the benefits of budgeting all day long, and you still might be thinking, “A budget—on my income? Who are you kidding?” Whether money management has always been a challenge or the fallout from the coronavirus killed your budget, it's important for your financial future to start one now or get back into the habit, even if you’re going to be working with a particularly tight budget.

Of course, it doesn’t matter where you fall on the socioeconomic scale—any household, regardless of income, can make financial mistakes, such as spending more than originally planned. Unfortunately, the impact of these mistakes are felt far more within a low-income household simply because there is less room for error.

While a high-income household may only have to cut back on luxury items, dining out, or other non-necessities to meet their monthly obligations if they go over budget, a low-income household risks missing their credit card payment, car payment, or even rent, which is much more serious.

What Is Considered Low Income in Canada?

So how do we determine who’s really feeling the pinch financially? Statistics Canada uses Low Income Measures (LIMs), a set of thresholds that identify which households’ incomes are below half of the median of the adjusted income distribution. This data helps researchers report the changing household dynamics of low-income families, which the government uses when considering initiatives designed to lend a hand.

On average, Statistics Canada defines low income for Canadians as $22,133 or less for a single person after tax; for a family of four, the low-income level is $44,266 or less after tax. Of course, these numbers may be higher or lower based on the city and the cost of living within it. For example, in Vancouver, Canada’s most expensive city, making below $38,500 would be considered low income.

How to Save Money on a Low Income

Trying to find some wiggle room to accommodate all of your monthly expenses can take some creativity. However, you can rest assured because it can be done! If you're wondering how to save money or how to stop spending money, keep reading to discover our best budgeting tips for families feeling the squeeze.

Of course, when it comes to household budgeting for low-income families, or those who have an irregular income, it’s always best to keep things simple.

Put Housing First

There are many budgeting categories, but nothing is more important than keeping a roof over your head, so always start with your housing payment (and always make it on time). It's tempting to think, "My landlord won't mind if I pay later on in the month,” but this is not a good mindset.

Low-income households need to take care of housing first and everything else after, because even if your landlord was forgiving of a late payment in the past, that could change in an instant.

Set Up an Emergency Fund 

Every household needs to have an emergency fund for occasional expenses such as car repairs, vet visits, back-to-school supplies, and gifts. This is especially important for lower income households because when these expenses come up, there’s a much bigger risk that other expenses will go unpaid.

A portion from every paycheque should be set aside into a separate savings account. Auto-transfers are fantastic for this because you can set it and forget it, and before you know it, you’ll have a substantial nest egg.

Save Loose Change

Saving your loonies and toonies and putting them into a Tax Free Savings Account (TFSA) or savings account is an easy way to start an emergency fund. Some banks also offer round-up features on debit cards, where extra change goes into savings; for example, if you spend $14.75 on lunch, they’ll charge an even $15 and put 25 cents into your savings.

Reduce Food Expenses

It’s very easy to overspend on food. Look for coupons and check out flyers. Shop generic versus name-brands. And always look for cost-friendly stores and those that price match; this can be a great way to manage your money and stick to your family’s food budget. When families are on a low-income budget, every dollar counts!

Shop with a Grocery List

Sticking to a grocery list will help you avoid impulse shopping and spending more than what you can afford. And be sure to avoid those overpriced items in the checkout lane—that can be where stores really get you!

Meal Prep on Sundays

We often spend money on prepared food just because it’s convenient, but preparing your own meals ahead of time will help you control your wallet and your waistband. Sundays are a great day to do this because it’s after the weekend mayhem and your meals will be fresher for the week. Get the kids involved too, so they start developing healthy habits.

Review Your Cell Phone Plan and Usage

Can you make changes to your cell phone plan? Could you give up a few gigs of data each month? Also, be sure to comparison shop between different service providers; many will price match to gain your business. You may also want to consider cancelling your landline.

Reduce Entertainment Costs

One quick way you can do this is by canceling your cable and signing up for a streaming service, like Netflix. Look for data plans that work with your income and usage.

Visit Your Local Library

Most libraries let you rent DVDs and books for free. They also host free events, seminars, and story time for children. Plus, who couldn’t use a little quiet time during their hectic week!

Check Out Community Activities

Most families enjoy having their children participate in extracurricular activities, but they can be expensive. Avoid privately-run activities and instead look into free or less expensive community-based activities via the local recreation centre. Plus, many centres are providing free online classes due to everyone being online now. 

Decrease Expenses Instead of Cutting Them Out

You may be wondering how to drastically cut expenses. Instead, Look at all of your expenses to see if small decreases can be made versus eliminating one or two expenses completely. This method can be more palatable for those of us who don’t want to give up something completely. Our budgeting calculator can help you see areas where you could cut back.

Budget for Current Expenses and a Portion of What You Owe

For example, if you owe a three-month phone bill, budget for the current bill plus a portion of the arrears, that way you avoid falling any further behind. However, if disconnection of a utility such as heating or electricity is imminent, that will need to be addressed immediately by contacting the service provider.

Need Budgeting Help? Contact Credit Canada

A household budget is an important tool for everyone, not just low-income households—but the stakes definitely get higher the tighter your budget becomes. To get started, try using our free online Budget Planner + Expense Tracker.

Looking for some free budgeting advice but don’t know where to turn? Our certified Credit Counsellors are standing by to give you a helping hand. You can always set up a free credit counselling session with one of our experts who will review your entire budget and figure out the best way to make it work for you and your family.

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