Now let’s face it, it is so hard to incorporate a paycheck-to-paycheck way of life into a controlled budget. When you’re favorite time of year is getting your income tax refund, just so you can catch up on all those past due bills and get everyone some needed new clothes. Even though you have tried numerous different styles and types of budgeting forms and done hours upon hours of research online. It just never seems to work.
I am 30 years old and have never really had a solid budget, I have tried many budgets throughout my life, however none of them really fit. Searching the internet I have learned all the basic steps in creating a budget, the only problem with that is my family has a very low income. We have no room to include savings, or an emergency fund. So how does a family create a working budget on a low income?
The information you are reading may sound a little backwards. I feel it is important to understand the basics of how much income you need in order to continue a lifestyle you are use to; while easing into a controlled budget where you are able to save and plan for the unexpected. So let’s get started!
First of all forget all the stuff that you have read on the internet, it just seems to block the mind of your true goal. Low income families have to have creative budgets, not standard ones. You have to be able to customize your budget, make it fit your way of life.
Think about your family and your needs and expenses, where you are financially and where you want to be in the future. Make a list of all your fixed bills; these include electric bills, water, trash, Phone, Internet, Television, car payment, insurance, credit cards and any bill the you have to pay on a monthly basis. Beside each of the bills write down when each is due and how much is due. This gives you a set amount you have to have to keep a roof over your head, and you basic needs.
Lets talk about family size for a moment. My family has five members, my husband and I along with our three children. On top of our family, we have friends stay with us off and on. So that means that our meals are larger, which means more food to purchase. Actually, it means all expenses are increased and planning meals just a bit harder. So you have to be just a little more diligent in making it all work.
Now that you have your fixed expenses written down, start a new page for your variable expenses, these are expenses that change month to month but you still spend money on like: gas for the cars and lawn equipment, cigarettes, cleaning products, personal care items and so on. Be honest with yourself when it comes to how you spend your money, include you bad habits even if listed under a different title (like entertainment).
I’m sure that you will notice this list is a bit larger than your fixed expenses, and there is still another list to make, I know it’s scary, but just stick with it. At this time you need to think about all those other things you spend your paycheck on. Like food, clothing, school events, sports programs, car tag renewals, personal property taxes, not to mention birthdays and holidays. This is part can be tough, think back to the last time you renewed you car tags, you do this every year, so it is close to the same every year. Think about how much you spend on your kids birthdays, if you can not remember choose an amount now to spend for each child and stick to it. A good amount for a birthday for a low income family is $50.00 per child, but don’t forget to include a separate amount for the party supplies, cake, and favors.
Holidays like Christmas put a huge strain on the already injured financial situation. Here you will need to again chose a suitable number for each child and for your spouse and other family members. It is very important that you plan ahead for these expenses, you’re going to spend it anyway.
Make your list of variable expenses, again listing in what month each is due and about how much you will spend. Don’t for get to include cash that you keep on hand each week. It is always nice to be able to spend a few buck here and there, just don’t spend more that about $10 dollars each per week on small personal pleasures.
This is the part I hate the most, determining how much you spend on all the other stuff that you buy without really thinking about it, for example a soda at the store or a candy bar. Eating out is always so tempting and just fine from time to time, however it needs to be curbed by all. I can remember my husband and I use to stop and get breakfast and lunch daily, plus sodas. We would spend $20.00 or more everyday, not including buying cigarettes or gas.
So to complete the above step, you need to make yet another list, but this one will take a few weeks or maybe even a month. When you have kids it’s hard to write down every time that you spend money and don’t get a receipt for. You can always carry a small notebook with you and before you go into the store write down where you are and what you are getting. When you come out write down the amount you spent. If your life is to crazy to add an additional task, try using only a check or debit card to pay for items. This way you have to write down the amount you spend and have a receipt for your purchases. Save all your receipts to include with all your lists. This will give you a better idea of how often you buy certain items such as laundry detergent, soap, toilet paper, etc
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Moving on, it’s time to consider how much income there is to go around. Include all wages and don’t forget child support if received. Also remember to include any federal or state assistance that you receive; Food Stamps, Tea, and the like. This information will help to make your budget work. I live in Arkansas and according to USDA in 2006 68% of the eligible working poor received assistance through the Food Stamp Program. That is the only way many families are able to pay the bills and still eat. One thing about the Food Stamp Program that many people don’t know is that you are allowed to purchase vegetable plants and seeds to grow in your own garden.
When you are doing the income portion, only list your take home pay not your gross. Now that you have the normal income covered, you need to move on to other income that helps you make it through. Income tax money. You can’t tell me that come January you are not already getting excited about filing you taxes. Knowing that if you can just manage to get through the next month or so, you can get back on track. Oh, how many times I recall saying that to myself.
It is easy to determine how much you should plan for each year. Look back over you last two or three years worth of taxes, if they are all close to the same, chose the lowest amount to add to your budget. If your employment has changed but you still make about the same amount or even a little more, you should still be okay. Never hurt anyone to end up with more money than expected.
Now you maybe wondering why you should add any of your income tax refund to your budget, simple, your are going to spend the money catching up on past due bills, needed clothes and other items at the time the money comes in. So why not include it and use it to your advantage. Personally, I use income tax money every year to pay for the kids birthdays ( February, April and May). Which gave me the impression that I could spend a little more, that’s not the case. With proper planning, it really can work to your advantage financially.
Okay, I would like to talk about savings for a few minutes. Everyone always says you need to have a back up, a savings account for emergencies. But what they don’t tell you is how to make it work in your budget, there’s not enough to go around as is. There really is a way, a very simple way. Start out saving all your change in a jar, if you don’t already. Depending on your bank you can start a savings account for around $50 to $100 dollars. Save your change to open your account. Make sure you find out the minimum balance to keep without getting a monthly charge. If it’s $250 dollars or more, save until time for your income tax refund. Budget the $250 dollars to open your account plus all your change. This is the hard part, don’t touch the money. Continue saving change, and once a week throw in a five dollar bill. Come income tax time the next year, take another $250 dollars plus your change and cash, deposit it in your account.
Don’t get me wrong, there are times when you just can’t make it without breaking in to that account, just try to only use what is necessary. Do not use this account to purchase “wants”. This is your savings account or your emergency fund.
Are you ready to enjoy all your hard work? How about setting a few goals for the future. Do you want to take a family vacation, get a new television, buy a new guitar or computer? Would you like to have a $3000 dollars in savings? The choices are yours. Think long and hard about your goals. Take a few days if you need to, it’s best it you start out small, say by this time next year, I plan to purchase a new laptop computer. Now I know that this is going to cost a large sum of money, how do I prepare for this expense? I take another five dollars every week and start my own personal at home savings, then I will budget some of our income tax money (not the remaining amount though).
Let’s say that a new laptop, a Mac, is going to cost around $1000 dollars. If I save five dollars a week for 52 weeks equals $260 dollars, if I budget $350 dollars out of our income tax that brings my up to $610 dollars. Now I’m left with a challenge, where do I come up with another four to five hundred dollars.
There are many ways to come up with extra money over time. You can plan a garage sale, shop at consignment stores, thrift stores, spent less on sodas and candy or cigarettes. By giving yourself a goal, your goal in turn gives you the incentive to change your habits. If your goal is something that you truly want or need, it will feel so good to be able to purchase it.
This is where I am going to ask you to change your lifestyle, sorry, but in order to achieve your new goals, it’s a must. The secret is to start slowly, don’t take on too much at a time. Any time is a good time to start using a budget, but the best time is when your income tax refund comes. Every year we look forward to getting to spend a small amount of money on ourselves. But if you can allow yourself a smaller amount this coming year, or go ahead and start your savings now, it just might make for a full fun filled day of shopping instead of a few hours.
Search for an alternative to the higher priced items, you may discover that the cheaper brands are about the same, however others are far from desirable. These are the decisions you will have to decide on as a family. Do your best to lower electric and water costs, check with utility companies about a budget plan, and reduce your spending.
Start out by planning now for income tax time. Doctor bills are one of the hardest things to have to pay out of pocket, so try to take care of all those bills as soon as possible, pay extra on your car payment, pay off and get rid of those credit cards. I know they are so great to have in case of an emergency, or “it’s only $30 bucks I’ll pay that this month”, just get rid of them and put more in your savings. Work on the smallest bills first, pay as many as you feel comfortable with at this point. But the sooner you get rid of those bills the sooner you will be able to save money and not pay high interest rates.
Having funds available in a checking account is like money burning a hole in your pocket, it’s hard not to spend. When you get your refund, know how much you are going to need to pay the bills, put that amount in the checking account and the remaining in the savings (you can always get some out when needed).
Look over all the lists that you have spend your time on, do the math. See where you stand, if you are over your total income, you need to cut some expenses or get rid of some bills. Try replacing your satellite or cable with an antenna and converter box. Perhaps if you are not using a go phone or pre-paid wireless, you should consider it. Plan out your meal (always to include a few quick fix meal, for nights you don’t want to cook), make a shopping list and stick to it. I should also mention saving your cans to recycle. There are tons on information online to help in reducing your spending.
Now all that is left is to put it all into action. Use a calendar to write down all the bills so you always know when they are due. Get a notebook, work one month at a time. At the top of the page, write the month and year. Next write down all the days income is received, grouping for each income individually. Make sure to includes how much you keep out in cash, not just what you deposit. On the next page, write the month and year, but this time you are going to be writing down all the money you have spent. At the end of each month total up the amount of income you have along with the total amount of expenses. Now use this information to estimate your budget for next month. If you are trying to cut expenses this should work well.
I have never read anywhere that setting up a budget is easy, and this one is no different. If anything it will be harder because of the fact that you are low income (why else would you be reading this book, sorry it’s so long, but it just doesn’t sound right breaking it up). Low income families have to make more sacrifices to get by week to week. Not to mention living low income without health insurance, that’s another article.
I hope that by reading this you’ve been given a new way to be creative with your low income budget. It’s going to be a long hard process, but stick to it and keep your budget up to date monthly. Your budget will very rarely stay the same month to month. Good luck!
