Video Transcript
Hey Tammy here!
Today I’m going to talk about how to budget on a single income. And for the purposes of this video I’m going to assume that we’re talking about a single income family with kids, as opposed to a single income family without kids. Because I think when this question is being asked it’s usually a single income family with kids. (If I’m wrong feel free to correct me! If you don’t have kids and you have that question then leave me a comment or send me an email and I will do a video for you). But for this video I’m going to assume were talking about a single income family with kids.
And then even within that there’s two different ways that could go… you could have a single income, two parent family… or single income, single parent family. And a lot of the things are going to be the same for both, but they will be some unique challenges for the single income, single parent family. I’ll talk first about the general things and then at the end I’ll touch on some of the challenges that a single income, single parent household might have.
Okay, so now we’re going to get into the actual budgeting side of things. For any budget you’re going to have two parts; there’s the income in, and expenses out. On the income side (and this is the thing, I think when people talk about budgeting on a single income they are almost talking in code for “budgeting on a lower income” because I think if that single income was $400,000 they wouldn’t be asking the question, so we’re talking about a single income that’s probably a lower income) so if we’re talking about the income side there are always things you can do to try to raise your income but we’re going to focus on expenses because we’re kind of assuming that that income side is where it is. But you’re always feel free to try to find ways to increase your income if that helps with your budgeting.
When it comes to budgeting on a single income there are three steps.
The first step is you need a budget! And especially since the lower your income the more important a budget is. A budget is important for everyone and every income because you can waste a lot of income if you have a high income, but on the lower income you don’t have the wiggle room that you would have with a higher income. If you have a lower income it’s even more important to have a budget.
If you don’t like the word budget call it a spending plan… you’re planning how you’re going to spend your money. Your money comes in and you make a plan for how you’re going to spend it. And that’s actually good because it’s better to plan where your money is going than to wonder where it went! Without a budget you might just wonder where it went. Have your budget. Have a plan, to know where your money is going to go.
Step two to budgeting on a single income is to play a good defence… meaning try to do as much as you can to keep your costs as low as you can. Cooking from home, shopping for sales, trying to save on childcare, all those things will help to lower your costs. That’s where if you’re a two-parent household, having that second parent at home can really help with some of those things, to help play a good defence.
Step three to living on a single income (and this may be the hardest one!) is to stop playing the comparison game! You made choices for your family that other families may not have made. One of the biggest ones might be that you made the choice to be a single income household. Maybe you didn’t make the choice to be a single income household (maybe that choice was made for you). But either way you can’t compare yourself to two income families. And also know that when you see some other family’s fancy vacation or their new sofa, know that more likely than not, that family’s finances are completely out of control and that they’re probably using debt to buy all those shiny new things (If you want proof then click this link to see debt statistics for the average household). So while it may look like that other family is “winning” you can know that in the long run your family is the one that’s going to win the race.
Okay, so I have talked about the three steps to budgeting on a single income, now I want to briefly touch on some of the unique challenges that the single parent household might face. The first step was to have a budget, which is still just as important for that single parent household, but the challenge you have as a single parent is that you don’t have that built-in accountability partner and sounding board. So it’s critical for you to try to find another single parent, who has the same financial goals as you, to act as your sounding board and your accountability partner (to make sure that you’re staying on track with your budget and then you help them to stay on track with their budget, and help keep them accountable and act as their soundboard too).
The second step was playing good defence, which once again will be more challenging if you’re a single parent household. But trying to team up and pair up with other families that maybe can help provide childcare, or ideas on how to save money.
And then the third one is the comparison game. Once again this is more difficult for single parents because you’re not only comparing yourself to two income households; you’re comparing yourself to two parent households. And you just can’t always do some of the things that they’re doing. That’s where once again that sounding board helps so that when you see someone else’s newly renovated kitchen or their brand-new sofa… and you’re looking at your un-renovated kitchen and your old sofa, and feeling sorry for yourself… that’s where they can remind you that you have larger, more important, goals that you’re trying to work on (rather than a renovated kitchen). Not that there’s anything wrong with a renovated kitchen! But if that’s not your goal your accountability partner can help you keep on track and help you remember that you have bigger, larger goals that you’re trying to work towards.
Action Step
Action step in this video is to go through the three steps for your family. Step one is to make sure you have a budget that you follow. Step two is to play a good defence… so look at all your expenses and see where you can possibly cut your costs. And step three, most importantly, is to stop playing the comparison game. Know that those families that have all those shiny things are most likely drowning financially and using debt to finance it. And that’s not what you want for your family!
If you have any questions or need some help with your budget I’d be happy to help you, feel free to get in touch, but otherwise…
That’s it for now!