How to Survive When Your Cash Flow is Cut Off

Tips for Living Frugally on a Low Income

Whether you’ve been forced to take a pay cut, you are on leave, a victim of the Phoenix pay system, or you or your spouse have lost your job, the thought of living on a lower income can be extremely stressful for any household.

With any change in your household salary, there are lots of factors to consider that will help you manage your money, and live comfortably, while cutting back on your current lifestyle.

What is Considered Low Income in Ontario?

According to the Ontario Ministry of Housing, a single income of $22,217 for a single-person household categorizes you as a low-income earner.

For a two-person household, the low-income threshold is $32,220, $39,462 for three people, and $44,542 for a four-person household.

Tips for Saving Money When Living on a Low Income

If you find yourself in a position where your income has unexpectedly dropped, here are some tips for budgeting for your new circumstances.

Create A New Budget

Immediately start tracking all of your spending for at least 30 days. This task is the basic building block of budgeting. At month end, summarize your spending into key categories – housing and utilities, food and clothing, transportation, insurance and other expenses. Continue doing this for a few months and every few months thereafter.

Take into consideration your new income, and make sure that you list essential and non-essential spending separately.

If you find that covering all your essential spending is now a challenge, you may need to make some changes and set a stricter budget for yourself.

Be sure to discuss your plans and budget with your spouse or partner. Communication is key!

Save Off the Top and Automate Your Savings

When you start making less money, it can be tempting to stop building up your savings. However, now, more than ever, it’s crucial that you continue directing a percentage of your income into your savings. This will help provide a cushion in case your financial position is to worsen, or you are faced with any unexpected major expenses, such as car repairs.

A good way to ensure you continue to build your savings is to set a specific amount to take off each paycheck and to automate monthly deposits. Even if the savings are modest, $10 or $20 a month. The acts of budgeting and saving will keep you focussed and help you get back on track.

Cut Back on Needless Spending

One of the easiest ways to save money is to track and cut back on your discretionary spending.

This includes morning coffees at a coffee shop, eating out, going to shows, and impulse purchases like a pack of gum or chocolate bar.

While most of these costs may seem small, when you calculate how much you are spending on a monthly and yearly basis, it starts to add up.

Along with tracking them, try setting a monthly or weekly budget for these types of expenses to help keep yourself on track and to avoid overspending.

Meal Plan

For many people, eating out for meals can take up a huge chunk of their monthly income, so it’s important to cut back when you are on a strict budget. Eating out can easily cost 5 to 6 times more than eating at home or making you own lunch.

To avoid the temptation of eating out, come up with a plan for dinners and lunches over the weekend. Shop with a grocery list and stick to it. Research recipes for basic healthy meals that don’t involve a lot of expensive ingredients.

Meal prepping is another a great way to hold yourself accountable. By preparing your meals for the week ahead of time, you’ll feel less tempted to skip cooking.

Right-Size Your Home

Living expenses also eat up a big chunk of your monthly budget, and while these are considered essentials, there are areas you can cut back.

If you are really struggling financially, you may want to consider downsizing and moving to a smaller home or an apartment with cheaper rent.

Also, set aside some time to look at your monthly utilities and how much you are paying for things like hydro. Try using less electricity to shave a few dollars off your bill.

And consider cancelling any services you are paying for that do not get a lot of use, such as a landline, cable or online subscriptions for products or services.

Spend Time, Not Money

With full-time jobs and other responsibilities, sometimes it’s just easier to hire people to take care of certain things for you, such as housekeeping, dry cleaning, and lawn care.

But when you can no longer afford these luxuries, you’ll need to make time to do them yourself.

Try the 30-Day ‘No Spend’ Challenge

As mentioned earlier, it’s critical that you cut back on your non-essential spending, but if this is something you are struggling with, try doing a 30 day no spending challenge to help hold yourself accountable.

What is It?

A 30-day no spending challenge is where you set a personal goal of absolutely no non-essential spending for an entire month.

How Does it Work?

The challenge only applies to spending on anything unnecessary, such as eating at restaurants.

Besides cutting non-essential spending, you will also have to write down every purchase you make, including how much you spent, and what you spent it on.

Here are some specific expenses that you should avoid during your 30-day challenge:

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  • Trips to coffee shops for coffees or expensive lattes
  • Going out for drinks at bars
  • Eating out or ordering take out
  • Rideshare or taxi rides
  • Amazon purchases/online shopping
  • Clothes shopping
  • Recreational events (concerts, movies, sporting events, etc.)


Here is a list of essential spending that is not excluded from the challenge:

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  • Essential groceries
  • Public transportation
  • Gas for your car
  • Rent or mortgage payments
  • Utilities
  • Basic cell phone bill
  • Basic internet
  • Personal hygiene products
  • Income tax installments for the self employed


Tips to Avoid Feeling Deprived

Completely cutting back on all non-essential expenses can be tough, and leave you feeling deprived.

However, if you find that you are doing a good job of reducing your spending, set some exceptions so you can occasionally treat yourself.

Exceptions can include a one-off dinner at a restaurant, a coffee in the morning, or cocktail after work.

Also find ways to fill your time that don’t require spending money, like finding new hobbies, or spending time with friends by hosting a movie or game night or going for walks.

Speak to Professionals About How to Pay Down Debt

If you find that the loss or reduction of your income has left you struggling to pay off debt, speak to an experienced credit counsellor at the office of a Licensed Insolvency Trustee for advice on your options.

Baker Tilly Ottawa Ltd. is a Licensed Insolvency Trustee servicing Ottawa, Gatineau and Eastern Ontario. Its licensed professionals have over 100 years of combined experience in assisting individuals and families facing financial difficulty. Since 2002, they have been the Licensed Insolvency Trustee of thousands of highly successful consumer proposals and bankruptcies. As highly trained and regulated professionals, you can count on them to be scrupulously honest and ethical, and very capable and experienced in resolving all types of debt challenges. Their passion – their mission – is your health and well-being!