Basic Budgeting When You Are Broke
Basic Budgeting when you are broke, so where do you start? There are already a lot of basic budgeting and self-helps out there—WHY? Because we all struggle with money or the lack of it.
So why one more?? Many of them assume you have a fair amount of income to work with.
This articles assumes that YOU DON’T !! What if you live below the national poverty levels?? For instance, what if your total annual family income is $25,000 or less?? (the $25,000 is being overly optimistic for many of you for sure.)
So if you’ve already cried, HELP !! – this is for you !! Let’s get started.
figure out how to pay basic bills
be empowered to increase your grocery buying power
put more food on your table, and
maybe even put more money in your pocket.
TOOLS YOU NEED:
pens and pencils
your bills, pay stubs, anything that shows your income and expenses
In fact, this might take you the next month to gather up everything you need. Get in the habit of collecting receipts everywhere you go. You are going to find out where YOUR money is going.
Now, spread out all the receipts and get writing them down—into 2 main category groups:
It is very important for you to write down ALL sources of income that you currently have. I mean it!! If you don’t figure out what you have for money to begin with—how can you figure out how to use it wiser?? BE TRUTHFUL WITH YOU.
So that means write down what you get from ODSP, Ontario Works, Pensions, Wages, Tips and Gratuities**, Monthly Tax Benefits, Quarterly Tax Benefits, Child Tax Credits, Alimony &/or Child Support, or any other money sources you have that are not listed here.
** Yes, the Tips & Gratuities. You did notice that line on your Income Tax Forms didn’t you? You have to claim if for Canada Revenue—so make sure you claim it for you!! And, back in my waitressing days—I could make $500+ on a weekend—that helped buy the extras we wanted or paid an unexpected bill—make use of it.
Next step is to find out where all your money is going. This is called Expenses. For now, write down all the basic ones you can think of or know that you pay monthly.
Items such as:
Rent/Mortgage, House Insurance/Tenant Insurance, Land Taxes
Heat, Hydro, Water/Sewer
Phone, Internet, Cable/Satellite
Vehicle Payments, Vehicle Gas, Vehicle Insurance, Vehicle Maintenance
and anything else that you are paying for or buying
“Therefore take no thought, saying, What shall we eat? or, What shall we drink? or Wherewithal shall we be clothed?
For after all these things do the Gentiles seek:) for your heavenly Father knoweth that ye have need of all these things.
But seek ye first the Kingdom of God, and his righteousness; and all these things shall be added unto you.”
— Matthew 6:31-33 KJF
BREAKING IT DOWN
Now is when you will discover whether your basic budget items are within acceptable boundaries. What are those?
Well, acceptable parameters for the most basic items are:
35-65% HOUSING–including your UTILITIES of heat, hydro, water/sewer. This DOES NOT include phone, internet, cable/satellite.
To calculate your numbers–try this simple method. Take your total monthly income and multiply by the lowest and highest percentages for both housing and food. Here, let’s look at an example, assuming you have a total monthly income from all sources of $2,000/month.
$2,000 X .35 = $700 and $2,000 X .65 = $1,300
So what do these numbers mean to YOU? Well, based on this example, the housing and utilities total costs should be between $700 and $1,300 a month.
Many financial advisers seem to have some unrealistic number of 30% they push–WHY?? After all, don’t you spend 50-75% of your time in your home/apartment?? Then it should cost you a large part of your income. So don’t panic with this number. For most people, especially if you are broke, it is exactly where it should be.
So, TAKE YOUR NUMBERS and do the calculations.
Do your actual numbers fall within these acceptable percentages?? If they do, then other than trying to see if you qualify for various government grants for hydro relief (such as Ontario Electricity Support ) or looking for cheaper rent, this expense probably can’t be adjusted too much lower for you based on actual housing costs in our region. (February, 2016 rent costs for a 1 BR apartment averages $900 utilities included or a 4 BR house averages $1,500 + utilities).
Another HUGE expense in your budget is FOOD. If your housing costs are closer to the 65% levels, then calculate your food budget at 16%, if your housing costs are lower, then you are blessed to be able to do the 18% calculation. In future postings we will discuss how to stretch these dollars for the best bargains and the most food on your table. For now you have a place to start to know what you have available for groceries.
Note that at this point you still have a range of anywhere between 19-47% of your monthly income left to work with. With these monies you now get to prioritize what is most important to you and your family as NEEDS (or are they just WANTS?). For some of you, having a vehicle to get to work is a NEED. For others, the cellphone, internet, cable or satellite is the NEED. This is where the serious family discussions and decisions need to be considered. When you only have the bare basics of income–some decisions are hard, and you can’t expect to have everything–some things have to go or be done without. Another time we will discuss this further, NEEDS vs WANTS.
Today you have been able to address the 2 most important BASIC BUDGETING items:
Housing and Food–even if you are broke.
- Have you discovered anything about your current financial situation?
- Are your housing costs realistic for your income? If paying too much, what should you be aiming for? What do you need to change?
- Do you have more food money available to you?
- Have you got some new insight into how you can free up more of your money for other things?
YOU are now EMPOWERED to make better decisions in regards to these 2 basic bills–housing and food. Once you address these 2 main items–then you can move on to include other items such as vehicle or cellphones, etc. into your budget.
So, even if you are broke, you now have the basic budgeting skills to get started.
To receive a FREE Basic Budgeting: Beginner’s Budget Worksheet fill out the form below. (Psst–we’ll send you some more freebies too!)