Thursday, June 04, 2009

Balancing on a Shoestring


  • Living on a limited income means stretching every dollar as far as it possibly can. Buying sales, using coupons, looking for the best deals, comparison shopping for quality & quantity and when it comes down to it in the end, going without when it means keeping head above water.

    Just how is a mother to stretch each dollar to cover every need? Focusing on what is truly important [needs] and things that we can live without [wants] and learning to balance a budget held together with a shoestring.

    Just Where Are You Coming From?

    Only experience and prioritizing my life mentally, financially and spiritually have I come to a place which gives me any sort of confidence in my life raising my son independently. Through the school of hard-knocks I have earned my 'undergraduate degree in financial planning' for my family. I don't know everything about the numbers-game and don't propose that everyone will agree with all of my ideas. I only know what has worked with reasonable success and what has failed abysmally for me personally.

    How Do I Get Started?

    Preparing a budget for yourself, if you're a student about to leave home for the first time, a single mom finding her way with mouths to feed, a sole provider for a family at home or a wealthy businessman; if you fail to plan then you plan to fail. Simple as that. A budget keeps a country and it's inhabitants happy or keeps them mired in poverty; but everyone needs a budget.

    Put together your list of monthly expenses, things you truthfully 'have to have' that doesn't include the coffee at Tim Horton's or things like that. This is the basic necessities of survival, (although I can hear the Tim Horton lovers saying "What? I have to get a coffee into me to get going in the morning!") bare with me for a moment. Get back to basics: shelter, clothing, food, heat/cooling, hydro, transportation.

    Your list will include a handful of very basic necessities which most of us have. Now write down what you 'must' pay for each of these necessary expenses. A total for rent or mortgage, heating/cooling, hydro, water/sewer, garbage, clothing, food, transportation, etc. Next to each you should have a total dollar figure per month (basing this on a month because rent payments are typically per month).

    Now make a second list of things that you like to have/do, for example: fitness club membership, TV cable/satellite service, Internet, Tim Horton's (or any other) coffee trips, fast food, recreational activities like: renting movies/games, going to the theatre, etc.

    Beside each write what you honestly spend on each one per month. Keep in mind that that can of pop in the machine that cost a buck, adds up if you do it every day! Be honest with the numbers, even if you are afraid to see what you are really spending. If you aren't sure what you spend, that's a big red flag that you have the potential for a serious pit fall financially.

    On the top of your paper write your total income in a month (this is from any and all sources). Subtract your total for NEEDS which you calculated above. With the remainder, (if any), subtract your total from your WANTS list above.

    Prioritizing your budget can be done by taking the list of NEEDS and focusing on what you must have within that grouping. Start by asking yourself questions like:

    What options do I have for size of housing?

    Is a one bedroom apartment compared to a bachelor or sharing a two bedroom really the best financial option for me, right now?

    How close am I able to live to my work or educational institution and other necessities (groceries, pharmacy, etc)?

    Can I walk, ride a bike, take public transit or car pool, instead of having a personal vehicle for the time being to save money?

    Am I using the heating/cooling systems in my home efficiently to prevent drafts and unwanted heat/cooling loss?

    What other cost saving techniques could I use to make sure my bills are as low as possible?
    Do I shut the lights off when I leave a room, etc.?

    Do I purchase frozen or ready made meals to save time or because I don't know how to cook healthy tasteful meals?

    Am I choosing the best foods, or just the most convenient at the time to prepare?

    Do I buy clothing at malls and high end stores all of the time, or can I try alternatives to paying high prices without sacrificing style and quality?

    Am I recycling or just throwing everything in the garbage? (Costing more money because you pay for the garbage to be removed by the bag.)

    Am I resourceful when it comes to using water or do I waste it?

Considering your cost of living (your absolute basic needs), looking at what you spend per month and what income there is to pay all of these expenses is very important and a wise habit for anyone wanting to feel like they are not swallowed up in debt.

What about [Student] Credit Cards?

Traditionally in your first year of post-secondary education, credit card companies will start tempting you with offers. Is it wise to give in to this card being offered to you at a low monthly fee or with great reward incentives? Only you can decide, but before you sign over your personal information allowing yourself to have the option of "instant gratification" with some fast cash, weigh out a few things on paper first, your own person honesty will keep you from making a decision which you can end up regretting. Ask yourself questions like:



  • At this point in time, although I could really use the money, where will I get the money to pay off this card when the bill comes in?

  • What is my primary purpose for having a credit card, right now (versus waiting until I graduate, or waiting until next semester, etc). What is my driving motivation for having a credit card in my possession?

  • What will I be like in a month or six months down the road, with one more payment to make monthly on my budget and can I really honestly afford it?

  • The instant gratification of having an "extra" $500 bucks sure looks good right about now, but that money isn't mine to keep and I have to pay it back with interest, do I really want to do that?

  • Could I pick up some spare work or sell something instead, if I really needed a few bucks right now?

Cold Hard Cash vs Cold Hard Reality


If I am in debt now, a credit card will help me get out of debt. No it won't. You are basically paying one debt (or several small ones) WITH another debt. You aren't getting ahead, and now you have interest to pay! Many people do this, called debt consolidation and although it can be a quick fix in the short term for some people; it can be a major down fall for other's.

"There are many benefits to Debt consolidation loans in Ontario Canada as it allows you to pay back all your loans much quicker, but if you are not careful, you can just as easily be much worse off in the longer term if you are unable to pay back your Debt consolidation loan. You may end up accumulating even more debt. It is imperative that the Debt consolidation loan is within your realistic means and income and you are committed to eliminating you Debt and making you repayments on time." [a]

For more information about Student Credit card warning signs of use, the checklist found HERE will be helpful.

Gaining Self-Confidence: Priceless

Weighing out the facts, if after all you have read about having a Student Credit card has led you to feel that you still should have one, then consider trying a pre paid card first. Test yourself, without affecting your own credit with a company or bank. If you succeed honestly and keep replacing money on your card faithfully and responsibly, then consider applying for a credit card in the future. The benefit will definately outway the hardship you will feel if you become mired in debt. Keeping your pre-paid card topped up will give you the sense of accomplishment and satisfaction that no 'quick fix' can provide because this is long term building your confidence in yourself. Building confidence in yourself is a much better reward than even the best platium card with rewards on the market! That truly is, priceless!


Cite your source:

[a] Debt Consolidation Loans Ontario Canada, subsection (e)



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