March 13, 2018 | By: Helen Ramlal

The 12 Best Budgeting Tips for Lower Income Families

Low Income

You might be thinking, “A budget—on my income? Who are you kidding?” Yes, budgeting can sometimes be a pain, especially if you’re working with a particularly tight budget and income. But that doesn’t make it any less important.

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 have to just 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.

Trying to find some wiggle room to accommodate all of your monthly expenses can take some creativity, but rest assured, it can be done! (And just like going to the dentist, it’s better to get it done sooner rather than later.) To help you get a head start, we’ve rounded up our best budgeting tips for families feeling the squeeze, financially speaking, and how spending less can always equal more for you and your family.

When it comes to budgeting for low-income households, it’s always best to keep things simple.

1.  Put housing first. Always make your housing payment on time, without fail—no ifs, ands or buts. Nothing is more important than keeping a roof over your head.  People may be tempted to say, “Oh, but my landlord doesn’t mind if I pay later on in the month.” In my opinion, this should never happen; 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.

2.  Set up an emergency fund. Every household needs to have an account where occasional expenses—car repairs, vet visits, clothing, back-to-school supplies, and gifts—can be paid through. But an emergency fund is especially important for lower income households because when these expenses do come up (and they will), there’s a much bigger risk that other expenses will go unpaid, and that’s a recipe for trouble. 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.

3.  Save loose change. Because every bit counts! 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. For low-income households, life’s expenses tend to mess up budgets, from school trips and pizza days to dental cleanings and parking. Saving little bits of money on a regular basis will make budgeting much easier and less stressful. 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, it’ll charge an even $15 and put 25 cents into your savings.

4.  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 save money and stick to your family’s food budget. When families are on a low-income budget, every dollar counts!

5.  Shop with a grocery list. And stick to it! This 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!

6.  Meal prep on Sundays. Want to save money and eat healthier? Meal prep, meal prep, meal prep! So many times we 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 (they’ll thank you when they’re older).

7.  Review your cell phone plan and usage. Can you make changes to your plan? Give up a few gigs? Also, be sure to comparison shop between different service providers; many will price match for your business. You might also consider cancelling your landline and just carrying a cell phone.

8.  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.

9.  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!

10. 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 at the local recreation centre.

11.  Decrease expenses versus cutting them out. 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 budget calculator can help you see areas where you may be able to cut back.

12.  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 your heating or electricity, is imminent, that will need to be addressed immediately by contacting the service provider.

Budgeting is an important tool for everyone, not just low-income households—but the stakes definitely get higher the tighter your budget becomes. If you’re looking for some free budgeting advice but don’t know where or how to start, 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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