The thing about budgeting is that we all know we have to do it, and often the hardest part is getting started. The challenge is even greater for adults with disabilities. In fact, 1 in 4 Americans with disabilities have a hard time finding employment and thus experience financial insecurity. Their economic situation is aggravated by several barriers including the additional costs of living with a disability and limited access to affordable transportation and housing. And as the article ‘The Rules of Working While on Disability’ highlighted, getting full-time employment, while possible, is difficult. One’s disability may be seen as a hindrance by employers which can prevent them from breaking into certain industries.
Even though not everyone has the same income and expenses, budgeting is crucial for financial stability. At the very least, a person with a disability can use a budget as a way to compare their previous finances to their present situation. You might be making less money now but you might also be getting unique forms of assistance, such as worker’s compensation or SSDI. On the other hand, you might have additional recurring expenses, like medication.
Here are four different methods of budgeting which can help you understand current income and expenses and set aside funds for the future.
This budgeting strategy is one of the simplest and most popular. It advocates allocating your after-tax income as follows: 50% on needs, 30% on wants and 20% for savings. Marcus explains that you should work around your discretionary income which is the amount of money coming in every month. Once you know that number, you’ll be able to allocate funds for those three main categories. Needs include monthly must-pay expenses like mortgage or rent, insurance, and minimum debt payment. Wants are all those things that you don’t actually need to survive but deep down you can’t do without. Finally, set aside a portion for savings and investments. It can also include paying down or paying off your debt. Even though debts fall under the ‘needs’ category, savings can include reducing the interest owed on any debts you have.
Also known as “pay yourself first” budgeting, it entails putting your money toward your savings before paying your bills. Say you’re making $1,200 per month on a part-time job and thinking of putting $200 toward retirement, $150 for your emergency fund, and the rest for your monthly bills. Based on Nerd Wallet’s explanation of this budgeting strategy, you should save the $350 first and use the remaining toward expenses. Just keep in mind that this technique is not as easy as it sounds. People with disabilities often live paycheck to paycheck and the last thing they think about is saving for retirement or investing. However, it also highlights that even on a very tight budget, you should prioritize setting aside even a small amount for the future — every little bit helps and will go a long way for greater financial stability.
Cash Only Budgeting
Many people find that using cash instead of credit or debit cards helps them save better because of the psychological impact of spending physical cash, especially crisp new bills. Obviously for some monthly expenses like your mortgage, for example, you will still need to have automatic debits from your account. However, categories like groceries or entertainment, which most of us tend to overspend on, will be much easier to control with cash.
The Balance claims that a good strategy is to use an envelope system, where you assign different envelopes with a set amount of cash for each budget category. A running ledger also helps you keep track, and will force you to stick to your designated amounts for each category. As with any budgeting, this requires even more self-discipline and organization, but the benefits are the work.
This method encourages you to use every dollar of your monthly income and give it a purpose. With zero-based budgeting, you are essentially allocating all your money to your debts, expenses, and savings. At the end of the month, your income minus your expenditures should equal zero. It’s very similar to the envelope system we described above, which includes allocating money for different budgeting categories and expenses.
The advantage of zero-based budgeting is that you can track where every dollar of your hard-earned income goes, which can prevent you from spending money that you don’t have. For this method, it’s important to take into account your paycheck and be aware of how much you can work with every month, to be able to track your expenses and identify which aspects you can cut back on and where you can allocate more.