“Borderline Budgeting” is a column by Mercedes Killeen about the intersection of mental health and spending habits. Mercedes writes about her own experiences with mental illness, and how she manages to practice skills like self-care while staying on budget.
When it comes to budgeting tips, many of them can seem disheartening if you’re working with a very limited income. I know this from experience.
A few years ago, when I became too sick to work, I had to eventually apply for social assistance. I had to leave my job, move out of my apartment, move back home with my family, and eventually drop out of school because my mental health was so bad. I was constantly hospitalized for weeks at a time, and things seemed impossible.
I’ve been on some form of social assistance for over two years now. I get by with a combination of disability checks and some freelance income, but I’m still working with a very little amount of money.
By all accounts, you’d probably expect that this string of events would have ruined my financial health. In actuality, hitting rock bottom forced me to get my shit together and figure out how to manage with a limited income. And over the past year, as I’ve really focused on my financial health, I’m happy to say that I’ve increased my net worth by over $6,000. This proves that financial changes don’t need to be all at once — and that even the most limited of budgets can yield results, with enough effort.
I want to start with the disclaimer that I am obviously very fortunate to have parents who allowed me to move back home. I do give them a portion of my disability checks as rent, but I recognize the privilege of being able to pay a reduced amount. As a queer person, it’s not lost on me that many people — especially those in the LGBT+ community — don’t have a home to go back to.
Nonetheless, here are the steps I took (most of which I learned by reading The Financial Diet!) to increase my net worth by over $6,000 CAD ($4,595 USD):
1. I prioritized paying off high-interest debt.
When I started this past year of working on my financial health, I had over $3,000 CAD($2,297 USD) in credit card debt. That balance, on top of my student loans, was definitely hurting my net worth.
As I started to learn more about debt repayment and interest rates, I realized that I need to seriously prioritize paying of my high-interest debt. For me, this was my credit card balance (even though my student loans were higher in terms of the dollar amount, the interest rate was still relatively low). I opted to do a balance transfer of my credit card debt to a different bank in order to take advantage of a 6-month promotional reduction in my interest rate (from 19.99% APR to less than 1%). I decided to use those six months of the promotional interest rate to heavily work on debt repayment.
Every month, I would put a massive chunk of my income towards debt repayment. I also made sure that any extra income I received — whether from tax refunds or miscellaneous gifts — went straight to paying off my credit card debt. At this point, one year later, I’m over 80% done paying off my full credit card balance. This has made a huge difference in terms of increasing my net worth. Of course, while working to pay off my credit card debt, I’ve had to actively work to not get into more debt. So, every time I use my credit card to buy something new, I repay that dollar amount within minutes — I go straight to my banking app and move the money from my checking account, no excuses. This, coupled with debt repayment, has been a massive shift.
2. I committed to saving a fixed amount each month.
About halfway through my debt repayment process, I started to get serious about my savings goals. I prioritized credit card payments for those six months of the promotional interest rate, but once I had made a good dent in the balance, I shifted my focus to also include saving up an emergency fund.
It took me far too long to get around to doing this, but after many months, I finally saved up three months of living expenses (adjusted for when I move out again and will need to pay a higher amount in rent and utilities). I can’t tell you how meaningful it’s been to have that amount of money in my bank account.
Even though it’s only a few thousand dollars, owning that amount of money seemed impossible just last year. But I learned that if I really got serious about my financial health and made a plan, I could (over time) reach goals like this. It took many months of saving, cutting expenses, and keeping my head down, but it’s worked out.
Now that I’ve finally found a sense of security by having an emergency fund, I’ve started saving up to eventually get my own apartment again. It will still be several months until I can reasonably expect to have enough money to do so, but it feels good knowing that I’m on my way.
I know that many experts recommend automatic transfers from your checking to savings account each month in order to streamline the process, but I’ve had to slightly modify that advice. Because my social assistance checks come on a different business day each month, and the total amount varies based on how much employment income I’ve managed to earn that past month, my income isn’t always 100% on the same schedule. I still basically do the same thing — it’s just not automated. Once I receive my disability check, within a few days, I transfer the money (which is a pretty large portion of my total income) over to my savings account. (I have one savings account for my emergency fund, and another for moving out. At this point, I send my monthly savings to the latter.)
This is a set amount each month, and there are no excuses. The money is out of my checking account immediately, and I then plan my disposable income working from whatever’s leftover. Now, saving money always comes first, and I’ve managed to increase my net worth even more.
3. I actually started sticking to a monthly (and weekly) budget.
Lastly, the only way I’ve managed to stay on top of debt repayment and savings goals is by actually having a budget. Before I started this year of improving my financial health, I had no self-control in terms of spending. Due to worsening mental health issues and just general recklessness, I was often spending money on alcohol and mindless shopping in an effort to feel better. I had no deliberate method in terms of saving money or spending money. I was one of those people who wouldn’t look at their bank account because it seemed too scary. I tried to ignore the fact that I didn’t have much money and that I wasn’t spending the little income I did have in a meaningful way.
Through budgeting apps like DailyPocket and Mint, I’ve learned how to understand figures like my net worth and weekly disposable income. I’ve also started financial journaling, which is actually enjoyable to me. At least once per week, I take about 30 minutes to sit down with a pen and paper and dig into the nitty-gritty of my financial well-being by writing down the following: my account balances (both business and personal), my credit card balance, any pending income, any pending fixed expenses, and how much money per week I can afford to use for recreational reasons. This means that I’m always on top of my money — I know how much I have, how much I will have, how much I plan to spend on fixed expenses that month (i.e. rent, savings goals), and how much I can reasonably spend on fun things, like getting my nails done or getting a coffee with a friend.
With this newfound awareness, I feel so much more freedom. I feel empowered by taking control of my money, working towards major goals, staying on budget, and spending recreationally, but in a logical way. I don’t feel restricted or guilty for spending money on something like a manicure, because I know exactly how it fits into the bigger picture of my financial health.
What to do when conventional financial advice doesn’t apply to you
As is often discussed on TFD, so much of conventional financial advice ignores the realities of being a poor/low-income person. We’re often advised to stop getting haircuts or buying coffees because, obviously, it’s our own fault that we’re in this situation.
In reality, there are many other factors at play when it comes to living as a low-income person, like the rising costs of college education, lower income levels for millennials (especially women), systemic racism, discrimination against people with disabilities, and more.
While it’s difficult to navigate these issues (and often unfair), we can take back some semblance of control by making tangible efforts to improve our financial health. Even if we just put $10 towards repaying our debt, transfer $5 to our savings accounts, or simply start checking our account balances, we can start to shift from feeling helpless to feeling empowered with our money. Over time, those small changes can add up to major improvements.
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