6 The Budget Exercise

Living on minimum wage

Your family consists of two adults, Amari and Quinn, and two children, Morgan (age nine) and Avery (age three). Amari and Quinn both work full-time minimum wage jobs. Those jobs are at the same location, and shift work is possible 24/7. Shifts begin at 7:00 am, 3:00 pm, and 11:00 pm. If they have a car, it is a 25 minute drive from their home to work. If they use public transportation, it takes 1 hour and 20 minutes from home to work or return. The daycare is a 15 minute car drive in the opposite direction from the adults’ workplace, or a 35 minute bus ride, with buses going every 10-15 minutes during daycare hours. Morgan’s school hours are 8:30 am to 2:45 pm, and students can have lunch at school. The daycare hours are 6:00 am to 5:30 pm; pickups between 5:30 and 6:00 are charged an extra $15.00. The daycare does have a before and after school program, wherein it will walk school-aged children to the school in the morning and pick them up after school to go back to the daycare.

Calculating take home pay for your family (all figures shown here are based on Nova Scotia in 2021):

$12.95 x 40 hours/weekly = $518 x 52 weeks = $26, 936 (annual income, one adult)

Subtract: $6408.07 (NS tax rate: 8.79% plus Federal tax rate: 15% = 23.79% total tax rate)

Take home pay: $20,527.93 /12 months = $1710.66 monthly take home after taxes, one adult

Multiply by two = $3421.32 monthly take home after taxes, two adults

Add: $1275 Child Tax Benefit (Nova Scotia Child Benefit is combined with the federally funded Canada Child Benefit, and is based on family income from the previous year and the number and age of your children.

Total: $4696.32 = monthly household income, two adults working full-time, minimum wage, with two children, one over age six, one under age six

Fill in the following budget, based on a $4696.32 monthly income: You may work through your budget any way you choose, but remember that each decision you make may impact another decision.

Discussion Questions for Budget Exercises:

As you work your way through this exercise, (we usually run it in class in small groups of four, so participants can confer with one another about costs, and split some of the tasks, like looking up transit schedules in different communities) ask yourself the following questions:

What kind of decisions do I need to make when deciding on a line item in the budget? For instance, you are able to either have your family rent, or own their own home. But what is associated with owning your own home? You will have needed to come up with a down payment in order to qualify for a mortgage. Typical costs associated with buying a home frequently double the amount needed for a down payment: lawyer fees, property searches, tax repayments to the seller, even the cost of a full oil tank (hint: it’s between six hundred and a thousand dollars, depending on the price of oil). Most banks will say that if you are buying a home that costs $100,000, you need a minimum of five percent (five thousand dollars) as your down payment, and up to another five thousand dollars for all of the associated fees. If you own your own home, you are also responsible for all associated costs: a new roof, or hot water tank; taxes, maintenance; snow shoveling/clearing and yard maintenance; heating, electricity, and other utilities; home insurance; and so on.

How does a decision in one place affect other decisions I make in my budget? For instance, if you decide they will use public transit rather than own and run your own car, this will directly influence where your family can live. Clearly, you need to live near reliable public transit, and these areas are often more expensive than further out of the town or city you are living in.

When we run the Budget Exercise in our classes, we encourage participants to use real situations: look up the costs of things in the community you are living in, rather than guessing or making up numbers.

*Examples of things that will affect the family budget:

One of the adults comes down with strep throat and is not able to work for four days. In addition to the lost wages (calculate these), the cost of prescriptions and over-the-counter medications totals $73.00. How does your budget accommodate these costs? One week later, Avery comes down with the same throat infection and is not allowed to go back to daycare for one week. One adult needs to stay home; calculate the lost wages. Prescription costs are $39.00. The daycare will also require a signed doctor’s letter confirming that Avery is no longer infectious and may return to daycare; many doctors now charge $40 to write such a letter.

Some good news!! Or is it? Amari bought a $1.00 raffle ticket to support minor hockey, and just won first prize: a four day, three night trip for two to Montreal to see the Canadiens play the Red Wings. Included in the prize are airfare, hotel, game tickets, and $300 spending money. Departure from the airport leaves on Thursday mid-afternoon and returns at 8:00 p.m. Sunday evening. Quinn and Amari have not had a vacation together since before Morgan was born. What will they need to take into account – and pay for – to decide whether they can take this trip together/at all?

One last critical thinking question: what would happen if your two-adult family were to become a one-adult family, based on today’s scenario? We ask this question because for many families, regardless of income levels, being a single parent family is a reality. We are going to leave the 24/7 schedule to your own thinking, but we offer you a quick set of income figures to see what happens for this family if one adult is no longer present. We thought about just having one adult quit work to stay home, but that does mean that they are still available to do full time child-rearing (so no day care costs), household care and shopping, meal preparation, and etc. Our question is: what does life look like for not just a single-income family, but a family where one adult is doing all of the work, in and out of the house?