Budgeting for single income households

July 21st, 2023

The Australian housing market poses significant challenges for single-income and dual-income households as they grapple with the burden of mortgage repayments and other expenses. According to a research study conducted by Canstar, homeowners repay an average of $584,836 for their home loans, leading to a monthly loan repayment of $3,883. For the average single-income household in Australia, this translates to approximately 135 hours or 18 days of work every month dedicated solely to covering their mortgage expenses. Unfortunately, this can leave little room for meeting other essential household expenses, creating a difficult financial situation. However, it’s important to note that this figure may vary significantly depending on the specific circumstances and profession of each individual single-income household. 

Canstar’s editor-at-large, Effie Zahos, expressed concern about the implications of this financial strain. With 82% of their monthly working hours devoted to mortgage repayments, single-income households face limited resources to cover other crucial expenses such as groceries, electricity bills, and insurance premiums. These basic necessities already demand a substantial portion of their income, which can leave little for discretionary spending or saving for emergencies.

The cost of living crisis exacerbates the situation further, with a notable 7.9% increase in the cost of food and non-alcoholic beverages over the past year. This can put immense pressure on families struggling to make ends meet, as the average monthly grocery expense alone amounts to three days’ worth of wages. Additionally, the average monthly electric bill of $162 would require almost six hours of work to pay off.

Apart from groceries and electricity bills, other household essentials like home and contents insurance impose additional financial strain. The average monthly premium of $187 necessitates nearly an entire day’s worth of wages, and can leave single-income households with limited funds to allocate to other important aspects of life.

However, the impact of the financial struggle goes beyond monetary constraints; it affects the very essence of life—time. With most of their working hours spent on bills, single-income households have little time left to pursue interests, hobbies, or spend quality time with loved ones. As Effie Zahos rightly emphasises, time is indeed the most valuable asset, and the cost-of-living crisis robs families of the opportunity to invest in activities that bring joy and fulfilment.

To navigate this cost-of-living crisis, single-income households can implement effective budgeting strategies:

  • Establish a Comprehensive Budget: Assess your income and expenses thoroughly. Track all sources of income and categorise expenses to gain a clear understanding of your financial position.
  • Prioritise Essential Expenses: Identify and allocate a specific portion of your income to cover essential expenses such as housing, groceries, utilities, and transportation costs.
  • Trim Non-Essential Spending: Review discretionary expenses and identify areas where you can cut back. To allocate more resources towards essential expenses, contemplate cutting back on discretionary spending, such as dining out, entertainment, and non-essential purchases. This allows for a potential increase in funds for crucial financial priorities without compromising the goal of reducing the time spent working.
  • Embrace Smart Shopping Habits: Use coupons, compare prices, and shop during sales to save on expenses. Purchasing generic or store-brand items can also help reduce grocery costs without compromising quality.
  • Create an Emergency Fund: Establish an emergency fund to provide a safety net for unexpected expenses. Aim to save three to six months’ worth of living expenses to help cushion any financial shocks.
  • Consider Supplementing Income: Explore flexible part-time or freelance opportunities to supplement your income. Utilise your skills and hobbies to generate additional revenue that can help alleviate financial strain.

By implementing these budgeting strategies and seeking available financial assistance, single-income households can navigate the cost-of-living crisis more efficiently. Through careful financial planning and prioritisation, it becomes possible to regain control of finances and allocate more time and resources to the things that bring happiness and fulfilment.

In conclusion, while the Australian housing market may pose significant challenges for both single-income and dual-income households, there are practical strategies that can help navigate the cost-of-living crisis effectively. Effie Zahos’s insight on the value of time serves as a reminder that adopting practical budgeting techniques and prioritising financial stability can lead to a better balance between financial obligations and personal well-being. By adopting smart budgeting techniques, prioritising essential expenses, and seeking additional sources of income, households can regain control of their finances and free up time. Remember, financial stability is a journey, and with determination and perseverance, positive change can be achieved, leading to a more balanced life. These principles can be applied universally, empowering individuals to achieve greater financial control and allocate more free time to pursue their passions and interests.