GET OUT OF DEBT TODAY!
THE BUDGETING TOOL - $50 USD
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Tag Archives: Spending
I’ve been requested several times to write a post on how to do this, so here it is. I will be posting on how to cut your budget later.
FIND OUT YOUR NET INCOME
Gross income is what they tell you that you make when you’re negotiating a job offer.
Net income, is what you actually get in the bank account after everyone dips their paws into your honey pot and takes out their cut, and this would include:
- Prepaid taxes (also known as ‘tax withholdings’ in the U.S.
- Health insurance
- Social Security (also known as CPP or Canadian Pension Plan)
- Employment Insurance (EI in Canada)
- ..and whatever else you have to pay for out of your cheque
If you don’t know your net income, you should at least know how often you get paid*, so look at the NET amount that gets put into your bank account or is printed on your cheque, then figure out what it should be monthly.
So if you get $2000 in your bank account bi-weekly (every 2 weeks), you earn $4000 net a month.
THAT is what you should budget with.
*Because everyone loves payday. It’s my favourite day of the week.
You also do not have to break it down the way I have with categories.
Pick and choose what works for you.
FIND OUT WHAT YOU SPEND AS FIXED EXPENSES
Now you’re wondering WTF a “fixed” expense is. It’s basically anything you MUST pay each month that doesn’t change as an amount.
This is stuff like Rent, or even your Cellphone if you don’t go over your minutes or data plan.
If you want a general idea of what fixed expenses are, here’s it is.
A GENERAL LIST OF FIXED EXPENSES
Just make a list of all the categories.
- Mortgage Payments
- Car Payment
- Debt Repayment (your minimums, assuming you aren’t incurring more debt)
- Cellphone (assuming you don’t go over your minutes and/or have an unlimited plan)
- Health Insurance
- Car Insurance
- Home Insurance
- Transportation — This can be a fixed expenses if you buy a metropass for instance
FIND OUT WHAT CATEGORIES YOU HAVE LEFT THAT ARE VARIABLE EXPENSES
Just like fixed expenses, you have variable ones that are under your control each month.
For the second part of your budget, figure out what your NECESSARY variable expenses are. This does not include eating out or entertainment.
I’m even debating putting Cellphone/Telephone/Internet on there as “necessary”, but for the sake of normalcy, let’s call them necessary.
Those are UNNECESSARY variable expenses for the purposes of setting budget priorities.
A GENERAL LIST OF NECESSARY VARIABLE EXPENSES
- Utilities to run the home — Electricity, Gas, Water, Heat
- Office — Postage, Delivery, Paper, Pens, Pencils and so on
- Household Supplies — Toilet paper, Cleaning supplies
- Toiletries — Toothpaste, Soap, Toothbrush, Floss, Shampoo, Conditioner
- Medicine — Vitamins, prescriptions, pills
- Parking/Gas — If you have a car
- Pet Food
- Basic Clothing
- Grooming — For a haircut twice a year
- Home maintenance
- Furniture purchases
Now that you have fixed expenses, you should list all the rest that is technically “fun” and unnecessary.
A GENERAL LIST OF UNNECESSARY VARIABLE EXPENSES
- Eating Out
- Alcohol — Drinking
- Clothing — Beyond Wardrobe Essentials (even my list is a bit over the top..)
- Starbucks/Teavana — Buying coffee outside, or other drinks
- Spa — Facials, Massages
- Grooming — Beyond just a haircut, includes Manicures, Pedicures
- Books/Magazines — There is a library for a reason
- Fees — They’re generally unnecessary if you avoid ATMs and incurring fees
THE CATEGORIES ARE FINISHED, NOW ESTIMATE ALLOCATING MONEY TO THEM
You will notice that you have separated your budget categories out by Fixed, Necessary Variable and Unnecessary Variable.
Those are your PRIORITIES of where you should think about adding or cutting money as required.
The actual budgeting comes in, when you apply percentages to them — here’s an ideal household budget with its percentages.
So if for instance, you’re spending more than 35% on Shelter, and more than 25% on Life (going out, eating, having fun), you need to either cut back in one or the other.
I’d actually try and cut back on ALL the expenses, including fixed ones (get a roommate, move to a cheaper apartment that’s a studio not a 1-bedroom), and see what you end up with.
You can’t have everything if you don’t have the net income to pay for it and save money.
Remember to use your net income against those percentages.
You probably haven’t been tracking your expenses at all, so in the meantime just estimate what you THINK it costs, track your expenses, and see what the actual cost per month turns out to be.
At the end of the first month, you will probably notice (as I did), that what I THOUGHT I spent, was way off from what I actually spent. In a bad way.
Once you continue to diligently track your expenses, and learn where you make mistakes, adjust your budget accordingly.
SOME BASIC BUDGETING NUMBERS TO START WITH
Here are some basic personal amounts to start with, and you can adjust as you go along your budgeting path:
(Real numbers are better, especially for fixed expenses like rent or mortgage or your debt.)
Note: These numbers are for a single person renting an apartment in Canada without a car and no debt.
- Rent: $700
- Apartment Insurance: $15
- Cellphone: $50
- Transportation: $130
- Groceries: $200
- Utilities: $50
- Household Supplies: $25
- Toiletries/Medicine: $25
- Parking/Gas: $250
- Internet: $50
- Clothing & Gifts: $50
- Eating Out: $50
Total = $1595 a month
As you run through the list, you may be thinking: Hey I pay more/less than that!
That’s where you have to adjust for yourself, and add in or remove categories that don’t apply to you.
Children you have, are not investments.
You have kids as a parent, knowing full well that you may spend about $250,000 until they’re 18 and ready to be shipped off to college or start whatever adult career they want to start, where you’ll spend goodness knows what on their education (if anything at all).
So why is it that my dad thinks we’re investments?
Just recently he asked for:
- Luxury, all-expenses first-class paid trip to London, England
- $500 a month (extra) as a sign of “respect” in dole money back to him
- A new car, because the one that they JUST BOUGHT, is not a luxury Mercedes-Benz
Is he out of his fricking mind?
We had a massive fight over this.
I yelled for a good hour and almost lost my voice, and I’ve been angry ever since.
HE’S TRYING TO SHOW OFF TO HIS BROTHER
It all boiled down to the fact that he’s been comparing what my (millionaire) uncle has gotten from his 3 sons.
They regularly give their parents $500 – $1000 a month as dole money, which works out to about $2500 a month coming in from the kids.
Now, what my uncle failed to mention (and my father has failed to recognize) is:
- He paid for their 4-year overseas education, tuition and living expenses — $500K minimum each*
- He gave them each $250,000 for a house or apartment down payment
*Paid for a nice apartment, bought them a new car to drive around while in school, paid living expenses, all food, all equipment, all books.
We’re just at around $750,000 per child. Totally free and clear.
OF COURSE THEY ARE GIVING MONEY BACK TO HIM!
They don’t need to give the money, but they’re doing it because:
- It’s a sign of ‘respect’ (or so he says, which makes my dad super jealous)
- They can expect to get the money back when he passes on anyway (this is my thought)
- They know there’s a fortune on the way of about a million to two million each kid (or more)
- …in addition to the $750K they have already gotten as their start in life
BUT WHAT HELP HAVE I GOTTEN FROM HIM? SERIOUSLY?
In contrast, what has my father done for me once I turned 18 and left by my own will?
- Didn’t save that $10,000 they promised they’d set aside for my education from their winnings
- Didn’t pay for my $60,000 education, nor offer to help me in any way
- …actually, hasn’t paid for anything since I turned 18, not even letting me stay at home rent-free*
*Not that I care, but people get really surprised when they hear that my parents charge me $600 in rent, in addition to my paying for all the food, cooking, cleaning, snow shovelling, garbage-throwing, helping, etc.
Now all of that above doesn’t matter to me in hindsight.
What bothers me now, is this asking for money, when he hasn’t done anything to (basically) deserve it.
It’s like comparing apples to oranges. The situation of my uncle and his sons, is NOT our situation, and I am not sure my father has told the entire truth to his side of the family.
He probably comes off as the self-sacrificing martyr in his one-sided stories.
I can’t say that going $60,000 into debt was an entirely ruinous experience, because I came out of it for the better, having learned how to manage my money, budget and track my expenses, and otherwise set myself on the path to riches.
Basically, I ended up on the right side of things by luck, and I have no doubt I’ll be a millionaire before 50, it’s just a question of how early before 50.
Currently, I don’t mind paying rent and buying all the groceries (AND cooking, AND cleaning), because it’s nice to be with my mom, having not lived or have been around to help her once I left.
It also isn’t fair to be a parasite on your parents, even if they can afford it.
As an example we could pay about the same amount (or less, actually) of the $600 rent if we lived on our own in Montreal, because we’ve done it before.
In fact, it’s actually costing us MORE money (about $100 – $200/month more) to live here with my parents, but we are choosing to do it for personal reasons. Or at least, I was, to be near to my mom for a little while before I leave for good this time.
This is the first time in years, that I’ve even been back for more than a month, since I left at 19. I’m generally always traveling or in another city, and my mom has told me she has missed me for the past 10+ years I haven’t been around them much.
THEY DON’T NEED THE MONEY
Furthermore, HE DOESN’T EVEN NEED THE DAMN MONEY.
He just wants to spend it on himself, to brag and to front like he’s rich when he isn’t.
Photograph I took of a stack of yuan we had when we went to China
Selfishly, spending the money that his children have worked hard for, when he himself, hasn’t worked more than 15 hours a week in his life, living off his previous winnings, and using it to gamble in casinos.
Now he wants to mooch off his kids!?
They currently have the mortgage COMPLETELY cleared, and about $4000 a month coming in to cover the household.
As he was in charge of the money, he basically let money slip through their fingers like water their whole lives, not having saved enough for retirement on their own (not that it matters, they have a fairly decent company plan), and not having worked much his ENTIRE life, unlike my mother.
WE WERE HIS INVESTMENT/RETIREMENT PLAN, BUT HE NEVER PUT IN THE WORK OR THE MONEY REQUIRED INTO US
What does my dad really want?
To recoup his “investment” in his children because he feels like we owe him for having paid for ages 0 – 19.
The funny thing is he was a bit of an absent parent when we were growing up, and frankly, didn’t do anything for, or with us for more than 20% of the time.
Did I also mention that he hasn’t worked more than 15 hours a week at minimum wage OR LESS for his ENTIRE life? He spent his days doing.. Nothing. At. All.
Do you know who started doing her laundry at 7? This girl.
My mom was the real core of the house, but she had her own problems and work to handle, on top of trying to clean, cook, feed, prepare for, and help the 4 kids in the house with no help at all from my dad. She just didn’t have the time for us, so we turned independent at an early age.
I CAN AFFORD TO GIVE MONEY, BUT NOT FOR THEM TO WASTE IT
I can’t even begin to tell you how upset I’ve been this whole week after our knock’em’down-drag-’em-out-fight.
Yes, I have money.
Yes my other 3 siblings have money.
Yes, we CAN afford to give him money even from our savings and not be destitute, but taking all of the above into account, why should we?
It’s not like we plan on leaving them for dead, but we also don’t see the point of giving him money … for NOTHING.
We’ve already agreed among ourselves that if they have a serious need for the money like a nursing home, healthcare, or anything that threatens their life, we would gladly chip in and pay.
Need $20,000 for a life-saving, critical surgery? I’ll sell my investments to pay for it.
But not if it’s just so you can buy a new car and brag to your brother about how your kids paid for it.
That’s just sheer idiocy.
Let me repeat this again, future and current parents: YOUR CHILDREN ARE NOT INVESTMENTS.
If you want investments, save your money and BUY THEM.
Don’t have children.
We aren’t guaranteed to give anything back, and frankly, they should be happy we didn’t turn out to be losers and drug addicts, with the way that they raised us.
The only data I’ve been able to get for all the countries at once, is for the year 2010. Luckily, it isn’t so far off from 2013, and the savings rates at a quick glance, haven’t really changed much from 2010, except in the fractions of percentages:
Here’s the chart I created in order of highest to lowest savings rates around the world for 2010
(Click to biggify anything)
China and India are the two towers of savings you see on the left.
New Zealand and Denmark are the two towers of not-saving you see on the right.
SAVE LIKE A DEVELOPING NATION FOR OPTIMAL RESULTS
It’s cultural as well, I’m sure, but China and India are blowing everyone else out of the water in terms of savings rates.
…OR AT LEAST SAVE LIKE SOME EUROPEANS
Aside from India or China, if we take a look at the next tier of double-digit savers from Turkey, France, Spain, Germany, Belgium and Portugal, their savings rates of 10.20% to 19.50% are nothing to sneeze at.
I received an email from a lovely reader (*waves!*) in Germany who told me that she recently read a statistic that young people (aged 14-25) are now saving about 28% of their income, and 20% of them, have already started saving for retirement, above their national average of 13.6%.
She also goes on to note that they can save 28% because they’re also living at home, so it helps.
AND WHERE DO WE STAND?
Clearly for Canadians and Americans, we’re not doing as well as we could.
The estimated savings rates for 2013 are actually lower than that.
Canada is set for a savings rate of 4.3%, and the U.S. is set for a savings rate of around 4%.
Australia will also up its game at 12.10%.
In detail, here are the specific numbers:
Data taken from: GFMAG, Business Week
ARE YOU KIDDING ME? LESS THAN 5% IS NOT ENOUGH
If we only save about 4.3%, it is for one thing, not even close to the PF maxim of save at least 10%, and certainly not enough to secure your future.
Let’s say you make $30,000 a year.
Your net income is $25,942, which is about $2161.83 a month.
4.3% for Canada, is about $92.96 a month.
In 30 years, it’d be $93,379.71.
Now it makes so much more sense why the average retirement savings for a person about to retire is only about $100,000.
Furthermore, with 4.3% as the average, it means that there are people saving less or more than that!
WE AREN’T SAVING ENOUGH!
In contrast, if you saved like other countries mentioned above, it’d look like this with a $30,000 salary per year:
Looks like China, India or Turkey would be my role model if I was earning $30,000 gross a year.
Obviously if you earn more, you could afford to save a bigger percentage of your net income, but you’d have to hit at least the same absolute dollar savings of about $10,000 a year to reach those numbers.
It’s why it’s better to look at your net savings per year rather than as a percentage of things.
You can get lost into thinking that you’re doing well, and you can afford to upgrade your lifestyle when you should really be doing much more.
That’s a rather high percentage of savings however, almost 40% is crazy, especially with the higher cost of living here versus a developing nation.
How do you figure out how much to save without starving?
To do all of the above, you need to know how much you spend on average, and where you can cut back on your spending.
If you have NO IDEA where your money is going, you can’t make any changes.
Estimations are for people who don’t have facts.
If I only estimated how much I spend each month rather than really tracking it, I’d be consistently under by a solid 30% – 50%, no doubt, and I would have been hard pressed to remember each category as an average each month.
Plus, I wouldn’t be saving as much as I am today, because I’d be out there wasting my money on crap without knowing where it’s really going. I’d probably be appalled at my spending once faced with the numbers on some debt show that I would eventually end up on.
HOW MUCH DO YOU THINK YOU NEED TO SAVE?
So this year, I decided that I needed to start budgeting like a freelancer, rather than someone with a steady income.
Most people tend to look at their net income each month, set a budget based on that (rent, groceries, savings, debt repayment), and budget to have $0 left unaccounted for.
So if they make $2000 a month, they can spend about $700 on housing (35%).
My income as a freelancer, spikes and then drops to $0, as evidenced below in my net worth from 2006 until the end of 2012 with all of the spikes then slow drops.
(Click to biggify)
Now, I’d like to set a budget for living reasonably, disregarding what I actually make as an income, and then save all the rest of my income.
The slight twist is that I now look at the yearly totals each month rather than monthly totals, which is something I’ve heard a few people mention.
This makes more sense because my income is not monthly, and I’ve been ad hoc budgeting like this for a while now, without realizing it.
I’ve just been giving myself an allowance each month!
NO MATTER WHAT I MAKE, $30,000 NET WILL BE MY NEW BUDGET
I had originally written the post: What is an ideal household budget? a while back (sometime in October I believe), and set it to $40,000, based on the fact that I grossed about $70,000 a year (2 years working, 3 were relaxing..).
Between October and now, I’ve decided that $30,000 net is my new budget for spending rather than around $33,000.
It’s easier than thinking of in gross dollars, and I spend in net dollars anyway.
(I also say net because it’s after any kind of taxes, give or take a few thousand ($3000 or so).)
Every year, I seem to come up with a budget for the next year, based on how I’ve been spending in the last 2 years, and trying to account for what caused my outrageous spending in categories like Wardrobe or Fees in 2012 for example (think: lawyers of all kinds, in all shapes and sizes, who then send you holiday greeting cards and tell you how much they loved your business!!..).
It never works out perfectly, but in general with the exception of last year *cough*2012*cough*……I have been spending less than ~$33,000 net per year or $40,000 gross, which isn’t so bad.
Therefore I now think of my budget as what I feel are reasonable expenses for my current situation and preference for living, which does not include:
- living in a cheap cardboard box with paper thin walls with noisy & smelly neighbours
- wearing a neutral uniform of the same type of clothing to match all the other minimalists
- refusing to travel or buy something shiny (within reason) because my heart desires it
- eating as cheaply as possible to save money — it is NOT my thing, y’all, I just can’t do it
- pinching pennies by making my own toilet paper — err.. has any uber frugal-er done this yet?
- savings — that will be assumed as ‘all the rest of my income’ after spending
You get the idea.
SEE, I ASSUME I CAN ALWAYS GET A JOB FOR $40,000 GROSS
As mentioned in my earlier post, I can always get $40,000 gross at the very minimum as a job enough to survive a year until I get something better.
And by survive, I mean pay for my current, comfortable lifestyle, but to save $0 for the year (not a viable long-term option).
This is a very conservative assumption for me, and I plan on keeping it like that.
In actuality, I can get a job at $90,000 – $130,000 gross working for a company, but I don’t like those kinds of numbers when I think of spending.
I’d rather think of that as a bonus if I make that kind of money.
I like those numbers when I think of SAVING all of that, if I gave myself an ideal budget to follow.
Spending that makes my impulse nerve twitch, then I want pretty things, and it snowballs into me crying in the corner, clutching my receipts and feeling overwhelming waves of guilt at spending.
$40,000 gross looks like this after taxes in Canadia*:
*misspelling as a joke for Americans..
For thy viewing convenience, I’ve highlighted the only 2 provinces and territories I actually work in.
- Ontario gives me $34,038 net
- Quebec gives me $32,131 net
This does not include any tax breaks from charitable donations or fully funding my retirement funds, which lowers my taxable income as well.
It also has a few thousand more than my $30,000 budget, because I like having a cushion for spending.
As a freelancer, I do have a few perks in terms of being able to write off some expenses related to my business (which is my brain), and this usually helps a little in terms of having more to spend.
MY $30,000 NET PERSONAL BUDGET FOR 2013…
As mentioned before, my previous ideal budget (before I wrote this post), was just about the same amount of money — $33,000 net spending instead of $30,000 net, but I’ve since changed and tweaked it a bit.
I am feeling this estimated budget for 2013 which is a nice $30,000 net.
Click to biggify
I really will try and look at it from a yearly point of view, and I’ve pored over every number to see if I could make it, and if it sounds realistic considering how I want to live.
If I spend all my money early on, that means I have $0 left for the rest of the year.
*already feels imprisoned a little…*
At the end of the day, I think I’d rather put more money towards Travel rather than Wardrobe, and it’ll be a personal challenge for me to spend less than that on Wardrobe and put the money into investing instead.
Wardrobe will include not only buying things, but also having them fixed or tailored.
You will also notice that I don’t stick to prescribed PF budget percentages.
Transportation is not a big thing for me. 5% is more than enough, I don’t need 15%.
I also don’t have Debt in there (‘cuz I have none), and no specific Savings category because I save what I don’t spend.
(Most PF’ers will tell you to save FIRST, then spend. I go the other way around.)
Under Housing, I spend a LOT but that’s to be expected, living in a hotel. We don’t want to take a lease for a year (the only kind available in Canada), and that’s that.
The rest of my budget goes to Living around 50%, but that’s because I pilfered from Transportation, Debt and Savings.
Savings are a given for me. They’re above and beyond the $30,000 budget I give myself to live on.
My savings have to be at least $36,000 a year ($24,000 if I’m really pushed for a minimum).
So in reality, I’d need to be making at least about $66,000 a year (net) to live like this, where I am able to save more than half of my net income which is perfectly in line with how much I can make per year if I took a Jane Job at a $90,000 gross income (my lower income salary number).
The reason why I’ve been making $75,000 gross instead of $90,000 gross is I’ve been working 2 out of the 5 years of my career, rather than 100% of the time.
I saw it as a good deal — almost the same amount of salary, for less than half the hours spent.
I am hoping this year will be a full year of working, and I’mma about to hustle for those jobs.
Update: ALL THAT MONEY PER MONTH, REALLY?
Well those are averages per month, as contingencies mostly.
$120/year for electronics should be more than enough, even if it sounds like too much or too little to you.
This is just for personal electronics, because I know things like cables get broken/lost/stolen, and I want to be sure that I have a contingency in place just in case.
Why put $0 when I know it probably won’t stay at $0?
Why put $2000 when I know it won’t be $2000 for personal electronics?
All I’m even eying is a Kobo Glo as we speak, but I am not willing to shell out $130 (my budget is only $120!), and I have a gift card for $50, but I am still not liking the actual retail price. $100 sounds more reasonable to me, and I’m willing to wait for a deal.
Unlike what many might do, I also pay for software at full retail price so I don’t have to worry about whether or not it works, on what PC/Mac, bla bla bla.
My software costs around $15 per (like Pixelmator, which is absolutely AWESOME for the Mac). I also use Picasa (free), but Pixelmator is for the more advanced stuff.
I don’t like to be hassled or troubled for stupid things, and the right thing is to pay for the software anyway.
I probably won’t end up spending this budget, but I need it there just in case.
CAN I STICK TO THIS BUDGET?
I SHOULD DAMN WELL SHOULD BE ABLE TO.
$2500 is a lot of money per month.
In fact, I should be able to spend less than this, but I don’t want to make anything unrealistic and then blow it and cry in the corner berating myself.
Now that we are CERTAIN we are staying in Canada, I am also more certain of not having $10,000 moving overseas or moving abroad costs that will slap my net worth silly.
Regardless, I have about $5000 that I keep at the back of my mind for if I overspend, as a contingency for things that come up once-in-a-lifetime.
If I don’t spend all the money (IDEAL! IDEAL!), I’ll save it instead. I’m fairly sure that Rent amount for instance at $12,000 won’t be that high, especially if I’m working.
DOES THIS ABOVE BUDGET INCLUDE BUSINESS STUFF?
That’s where it gets tricky. My business is selling my brain, and I needs a place to stay, something to eat, etc when I am on site.
I also have to pay taxes, fees, licenses… those expenses will all be tracked on a monthly basis, in a single, communal budget.
I used to keep 2 even 3 separate budgets for business/personal, but then it became too confusing flipping back and forth.
I’m trying to now do it all in one budget, and it will become a massive communal sheet that will be a work in progress for this year.
Regardless, the main goal is to stay under $30,000 for PERSONAL spending only.
..and to save at least $36,000 net this year.
SO WHAT ELSE DO I SAVE, THEN?
…..ALL MY UNREALIZED INCOME OF COURSE!
All the rest of my income, and I keep track of it as assets tab in my budgeting tool.
As a freelancer I should also point out the advantage of having unrealized income:
Assuming I work about 3 months next year (on the low side), that’s about $60,000 gross.
- Realize $30,000 in income
- Leave about $24,000 in the company as retained earnings (savings) after taxes
- If I realized the income, I’d be out another $10,000 in taxes, leaving me $14,000 of savings
On the mid-side, if I work 6 months next year (an average), that’s about $120,000 gross.
- Realize $30,000 in income
- Leave about $66,000 in the company as retained earnings/savings after taxes.
- If I realized the income, I’d be out $25,000 in taxes, leaving me $41,000 of savings
On the high side, if I work 9 months next year, that’s $180,000 gross.
- Realize $30,000 in income
- Leave about $114,000 in the company as retained earnings/savings after taxes.
- If I realized the income, I’d be out $46,000 in taxes, leaving me $68,000 of savings
Notice a pattern?
All of the above helps me minimize my tax burden if I just don’t spend it.
All the more reason for me to NOT TO REALIZE MY INCOME AND SPEND IT.
I avoid a lot of taxes, especially when you consider how much an impact charitable contributions and my RRSP/TFSA maxing out contribution makes.
This is all not taking into account if I have to pay for business traveling (hotels, flights, train tickets, car rentals, gas… you name it), so my retained earnings may vary by about 25%.
It doesn’t take into account any overtime.
Some months I work, may be more profitable than others.
It also goes without saying that I’ll also be investing that money on behalf of my company to grow in the meantime, which will essentially become my nest egg for retirement.
My austere-for-me plan for 2013, and a rough overview of how I will be budgeting going forward.
How do you do it?
By a percentage of your net income?
I am here to give a friendly message about SPAVING which is really just the act of “SPENDING TO SAVE”.
(You heard it here first.)
Spaving is when you tell yourself:
OMG it’s 50% off!
I don’t want or need it, but what if I do sometime!??
I’m saving 50% on this, it’s like I’m saving 50% of my money!
I HAVE TO GET IT!
WHEN YOU SPEND YOU AREN’T SAVING
Whenever you spend money, you are not saving it.
Technically, you’re actually just spending 100% of your money and saving 0%.
So spaving? It’s an excuse to spend your money, even if it’s a good deal.
WE ALL SPAVE
That said, we all spave.
For instance, I spaved a lot this month (actually, make that the whole year), which will you see coming up in my December 2012 What I spent post, but I’m very happy with my smart spaving.
This month was excellent because of all the Boxing Day sales and push to get people to spend more of their money and boost the bottom line before 2012 closes; so when you encounter 50% signs, or 15% off what you’ve been eying for a while, it’s hard to imagine that kind of sale will come around soon, let alone on what you want.
I’m starting to get into the mindset of waiting until I can find it secondhand, or if it’s on at least a 20% discount, or more.
(Even just thinking about buying things that are easily depreciated at full retail price is starting to irk me.)
Other pitfalls of spaving, are when you encounter programs like Ebates Canada, and they give you back cash for things you’d otherwise buy anyway.
It makes you think: Wow I’m saving another 4% on what I was going to buy! Let’s see what else there is….
Or even for us Canadians who head down south to the U.S. to do a little cross border shopping, and see how much lower the prices are now that the CAD is almost at par with the USD, and you save on not only the currency, but the lower taxes and the lower prices!
..JUST BE CAREFUL TO SPAVE ON WHAT YOU WANT OR NEED
Don’t go around buying useless knickknacks if you aren’t planning on using it.
When I spave, it’s on kitchen equipment that BF needs to keep making great meals, or when I see things that I want and otherwise would not pay full retail price for.
Or perhaps, to stock up on things I use a lot of such as contact lens solution, or my favourite cleanser.
I log all of my purchases, expenses and my general financial life into my handy budgeting tool, and when I see something I THINK is a good deal, I sometimes go back and check to see what I paid for it before.
Oftentimes, I realize I had gotten a better price for it elsewhere even with a sale of 20% off, and I don’t buy it just because it says 20% off (but the price was already inflated by 25% for instance).
Enjoy your spaving!
Use this superpower of finding great deals in good financial health.
American Express has these super uber high end charge cards, and Bridget of MAG, just recently got one.
NOTE: They say “charge cards”, because whatever you buy, has to be paid in full each month.
No credit allowed, or else you get a nice hefty 30% interest rate slap to the face, which is painful in more ways than one.
Here are their two baller offerings:
The American Express Platinum Card: $699/year
- Entry level card for those aspiring to reach the Centurion level
- Income has to be at least $60K/year
- You get 1.25 points in their Rewards Tier
- You can trade those points for airline or hotel rewards
Screenshot of the Amex Platinum site to prove that I checked online and it IS $699/year:
The American Express Centurion (Black) Card: $2500/year + a $7500 one-time fee
- Apparently it’s hand carved by woodland folk under a blue moon with fairy dusted tools*
- Have to be invited to get it — Update: this is the only thing I know for sure
- People say you have to spend over $250K on your Amex Platinum to get said invitation
- You also need a $20M net worth (apparently)
*not really, but it should be for that price!
SO WOULD I USE EITHER CARD?
I would, if the benefits made sense for my lifestyle.
Unfortunately, they don’t because I am not spendy enough in the areas where the card would end up benefitting me.
(Oh and the most important part being that I don’t have $20M in net worth either for the Centurion card!!!!!)
I DON’T REALLY NEED A CREDIT CARD TO BEGIN WITH
A moot point with Amex, as it’s a charge card which means no credit limits allowed beyond the month, but it bears mentioning.
I can actually pay for everything in cash, so I don’t technically need a debit or a credit card, but I like it when they give me added benefits I don’t have to pay for.
HATE LOATHE ANNUAL FEES
Actually, I hate all fees, even though I understand that in SOME cases they are necessary.
Bank fees, currency exchange fees, withdrawal fees.. you name it, I hate them.
My 2 criterion for when I look for a credit card?
- No annual fee
- Does it have points or cash back?
I don’t really care about the interest rate on the credit card (I never leave a balance), and other perks like car rental insurance is nice, but I use it once in a blue moon.
I don’t go to restaurants that often, nor order takeaway, so it’s completely useless as a benefit.
The hotels and airline points rewards they mention are useless for me.
When I travel on vacation, I stay at places like Ibis, which is the super budget hotel under the Accor Group. Their hotels are usually $100 a night on the high end, averaging around $80/night most times.
When I travel for work, it depends on who’s paying.
If I’m paying (this is usually the case), I stay at the cheapest possible hotel in a decently safe area with basic amenities (no sharing of bathrooms, for instance).
To put it in perspective: I’ve been known to shack up at the Econolodge, which is a lot like the Motel 6 for my American readers (no joke). That horrified even the most hardened of travelers, such as BF.
Otherwise, I consider Hilton or the Marriott to be the minimum if the client is paying.
When I live in hotels, I stay at apartment hotels, which can be any kind of brand such as the Marriott Residence Inn.
What does that all add up to in terms of Amex benefits? Jack squat.
INSURANCE FOR TRAVELING
The only insurance I buy when I travel is health insurance.
I pay about $52 for 4 weeks which is about $624/year (if I bought travel insurance for the year that is), and that’s only if I go out of the country.
For work, I generally never leave the country (only 5% of the time).
Other than that, car rental insurance is covered by Visa (which is why I have both a Visa and a Mastercard), just in case.
I don’t really change my plans, nor do I change my flights unless something like a hurricane happens and they have to cancel my flight (in which case the airline does it automatically and even gives you a “I’m sorry” gift).
WHO WOULD BENEFIT FROM IT?
That said, I have friends who charge everything to this particular Amex, earning 1.25 points and turning them into Aeroplan points.
Apparently that is how they financed a yearlong trip around the world (he’s a consultant at a big company, she’s a stay-at-home-mom).
If you do spend a lot of money on the card (if you travel for work, this is big) and you do plan on traveling a lot for pleasure, this is a good idea, and well worth that $699/year, as you can easily rack up over $2000/week at a minimum or more in spending when you travel for work (hotel, flights, eating dinners out, taxicabs), depending on where you fly/travel to.
Otherwise, if you’re like me, it does zip for you because you’re spending your own money, and aren’t likely to spend over $2000/week (more like $2000 a month).
Update: I think my friends said they spent about $3000/week average on that card between his job and their personal expenses. $3000/week x 1.25 points = 195,000 points a year.
Plus, he was a frequent hotel guest at one single hotel chain and at one airline, so he racked up points there in addition to those Amex points.
SO HAVE YOU, OR WOULD YOU CONSIDER THE CARD?
(Note: I’m picking on Santa Claus even though there are other holidays during that time to compete with Christmas, like Hanukkah, Kwanzaa and Festivus.)
You may not know it, and in which case I hate to burst your bubble, but Santa Claus doesn’t exist.
What’s interesting, is that people feel as though he does, and as a result, he is utterly responsible for all our money woes during the
Christmas is the time where people tend to go into the red but companies end up in the black.
The reason being, is that presents stop coming after a certain age but people are too used to treating themselves, so they can’t help but think this is the time of year to do it.
We make Wish Lists, we search for things we’d like other people to buy for us, and we think:
“Goddamnit, I’ve been SO GOOD this year, I deserve a treat.”
All the hard work of exercising, dieting, saving money — it all goes out the window for one month or so (December) while everyone pigs out in restaurants and stores with their bellies and their wallets to celebrate living through the end of a another year.
Online spending for the first 18 days of the holiday season has already reached 10.1 billion, a 16 percent jump from the same period last year.
The cheeriest day so far for online retailers was November 8, when consumers spent $829 million.
That’s how it goes when you’re surrounded by sparkly things, the smell of pine trees, gingerbread treats and lights flashing in your face.
You can’t help but pull out your wallet and spend on one of the busiest shopping months of the year.
And who can we blame for all of this?
THE BIG GUY IN RED OF COURSE!
Just look at his greedy eyes….. $_$……..
TIPS ON AVOIDING CHRISTMAS SPENDING BURNOUT:
- Don’t go shopping hungry. Studies have proven that you tend to spend more
- Bring snacks and water to keep your energy levels up for cheap so you don’t eat out
- Shop with CASH — once it’s gone, it’s gone
- Go with a budget (no really, go with a REAL BUDGET you have to stick to for each person)
- Don’t one-up or guilt-trip yourself into buying more than you can really afford
- One gift is enough, you don’t need 5 per person
- Spend more time on the present and use your creativity, and be less spendy
- Consider giving a gift card instead; almost 60% of people want a gift card for Christmas
Most of all… DO NOT SHOP AT THE LAST MINUTE!!! Do your shopping early so you can kick back and inwardly smirk at everyone else’s frantic purchases.
(Santa has to pay for his reindeer and eating habit somehow.)
As promised in an awesome infographic that I spent a lot of time on.
(Gawrsh those things take a long time!!)
Update: It is actually 24 days, because in addition, 4 days were spent traveling (time zones) which makes it 28 days, or 4 weeks.
It isn’t exactly 5 weeks (as in 35 days), but it was the tail end of one week, and the beginning of another, so I thought of it as 5 calendar weeks in my head, when the actual weeks by numbers is really 4.
I am making this long-winded note because I don’t want to redo the infographic. *sigh*
Update 2: Damn it. DAMN my OCD self. I updated it to say 4 weeks.
Here’s what the budget looks like in terms of percentages:
As you can see, flights and hotels obviously cost a lot more than everything else.
SAVING MONEY ON FLIGHTS = $800 SAVED
We took flights that had a stopover and that was about $400/ticket in savings.
Actually, this is probably better than a direct flight because it gives you a break from the plane.
Our flights were basically 2 legs: 15 hours, 3 hour stopover, 1 hour flight from somewhere in the U.S. back to Canada.
It gave us a nice break from the airplane, a chance to stretch, and either the first or the last leg was very short.
SAVING MONEY ON HOTELS = $720 SAVED
As mentioned, we stay in cheap hotels like Ibis.
There were two of them in Hong Kong — Ibis North Point and Ibis Sheung Wan, with the Sheung Wan location costing about $30 more per day.
We didn’t stay there because it was new and we didn’t know how big it would be (almost double the size of the Ibis North Point, and the size of an American-normal-sized budget hotel room).
As a result, we saved a lot by sleeping in a 120 square foot closet, also known as the Ibis North Point hotel.
SAVING MONEY ON FOOD = $935 SAVED
Food is the third biggest cost, and it could have easily been double if we had not been avoiding restaurants, and eating pre-made meals and buying fruit from a grocery store instead.
The hotels we stayed in also had mini fridges, so we bought milk for the morning and were able to keep small things in there.
A typical breakfast would be about $10 per person, and lunches and dinners are $20 per person, so had we been going out to eat every day for 24 days, it would have been $50/day per person on average.
24 days x $100 (for 2 people) = $2400 which is a reasonable budget for what we consider good food
(Also, we don’t like cheap or junk food when we go to restaurants because it’s crap, and if I’m going to a restaurant, it had better serve real food.)
Instead, we bought everything we wanted to eat (fancy yoghurts and sushi), and spent only $30.51 per person, or a little over half.
24 days x $61.02 (for 2 people) = $1464.48 is what we really spent
We saved about $935 doing that, although BF was getting antsy about the food costs near the end and wanted me to stop stuffing my trap so much.
SAVING MONEY ON TAXIS = $1000+?
We used the handy Octopus card, and spent $252.39 for the two of us to travel pretty much anywhere we liked in Hong Kong.
In contrast, taking a taxi would have probably tripled that budget, to about $1000. Or more.
$1000 / 24 days = $41.66 per day for transportation.
(We have no clue what it costs, as we don’t take taxis even in our daily lives, but if the prices are anything like in Toronto, it’s an expensive luxury.)
Cabbing to and from the airport, to and from sights and back and forth from the hotel adds up.
Anyway, the tram was way more fun and a great, cheap way to tour the city for the low price of $2.30 HKD or $0.29 USD!!!!!
TOTAL SAVINGS = ~$3455
Not too shabby.
Every little bit and every little sacrifice adds up to significant savings when you travel. That amount that we saved above, is enough for another week or two weeks somewhere.
All this talk about women and their money is a big deal these days.
Women do things with a rationality that may not necessarily always be clear to others.
You may think someone who has her husband pay for everything and take care of her is a stupid person, because she isn’t financially independent, nor is she a ‘strong’ woman.
On the contrary.
I think these women are probably the smartest of all.
Think about it — they get men to pay for everything, without having to work for the money, are kept, and if things don’t work out, they take them for half of what they’ve worked for!!!!!
I think a lot of women probably made their millions by marrying and divorcing it.
Tongue-in-cheek aside, for me, there are 5 broad categories of women in regards to their money:
- The Ostrich — Those who don’t care or want to know about their money AT ALL
- The Golddigger Princess — Those who actively seek out to be taken care of rather than working
- The Breadwinner — Those who bring home the bacon as the bigger earner of the partnership
- The Mommy — Those who baby their significant others and get frustrated in doing so
- The Independent — Those who want everything 50/50, no matter what
At some point in my life, I’m not afraid to admit that I have been all 5.
Disclaimer: Obviously my interpretation of each category is my own (and my own bias), but I also acknowledge that there are good and bad sides to each.
Oh, and don’t take this too seriously. It’s meant to be fun.
This woman is best represented by all women who have someone else to ‘take care of the money stuff’, and is probably in debt.
They may also be extremely carefree with their money “it’s just money, right? Money comes and goes.”
They usually don’t want to bother with paying the bills, worrying about saving and basically do whatever the other person/people tell her to do with her money.
They’re scared of numbers, they think personal finance and budgeting is not only a kind of prison on their money, but they also think it’s way more complicated math-wise than some basic addition, division and subtraction.
Motto? Numbers give me a headache. Can’t you take care of it?
Until recently, my mother was a big-time Ostrich.
She earned a lot of money, basically handed over whatever my father asked for “the bills” ($1000 for the gas? Yeah.. right.), and didn’t want to know or deal with what anything cost.
If you told her there was no money for _______, she’d nod and make do without it. Even food.
Personally, I was an Ostrich starting in college and ending about a few months after I graduated.
I didn’t want to know about my money. As long as I wasn’t in credit card debt, I figured I was fine — it was just student loans for goodness sake!
Money was just money. It went up, went down, and saving for retirement or to have a net worth never crossed my mind until I started budgeting, tracking my expenses and learning how to manage my money.
The Golddigger Princess
This woman is best represented by girls who go to college to get their MRS degree. What’s the MRS degree you ask? To become the Mrs. of a budding young lawyer, doctor and/or business tycoon by meeting them oh-so-innocently at their stalking spots — the library or in a dorm.
They are smart enough to get into the right degrees to meet their future spouses, but aren’t really interested in using that degree when they graduate.
They expect everyone around them to pay for them — parents, friends, boyfriend, siblings — and probably only work about 15 hours a week, if at all. Their money goes towards WANTS and savings are for losers.
She’s also probably the definition of ‘high maintenance’, and you better know what you’re getting into when you start going out with her.
Motto? I deserve it it all and you better buy it for me. Or else.
I wasn’t a big-time Golddigger Princess mostly because people around me didn’t have money, however I did have one brief relationship in college where the guy basically paid for everything. I think I may have reached for my wallet once and he admonished me.
I felt like a Golddigger Princess (which was actually kind of nice), but ultimately I couldn’t stay in the relationship because I felt like a child rather than an independent person.
Plus, he had that traditional men+women belief system going on. No thank you.
I wasn’t willing to give up my personal beliefs, views and independence just to have someone take care of me financially and buy me pretty things in exchange for a boring, opinion-less life.
That’s not to say that women who are in this category are ‘weak’. They’re just seeking another lifestyle, and willing to give up what it takes to get it. They’re choosing in their own way.
This woman is best represented by any woman in a relationship who makes more than their spouse.
Generally, this woman is not afraid to use that bigger income and rub it in their faces to justify spending what she spends.
Secretly, she wishes she didn’t make more money so she could be taken care of, instead of being relied upon as the one who is in charge. Yes, she knows it’s silly to think that in this Age of Feminism (women’s rights and all that), but nevertheless, she resents her role. Just a little.
Then again, not all Breadwinner Women are like this.
Motto? The one who earns the money, gets to decide.
My mother is also a Breadwinner in addition to being an Ostrich. She brings home 100% of the income, pays for everything and doesn’t rub it into anyone’s faces.
We’re all super proud of her, and she’s proud of herself, never having imagined a young country girl who was educated and grew up in the middle of nowhere could have made it to such success, even by North American standards.
I too, was also the Breadwinner at one point.
I made more money, I was proud that I did, but I definitely resented it, and I realized my resentment stemmed less from not being taken care of (Golddigger Princess), but more that I felt it was unfair that I had to work 100%, pay 100%, and be with a someone who couldn’t be bothered to hold down a job.
That’s why I am the way I am about money today.
(I do agree that the one who earns the money gets to decide what to do with it.)
Men may be okay with taking care of other women as the sugardaddy, but I was not cool with that role. If you are in that relationship and it works for you — all the power to you!
This woman is best represented by all women who have significant others that are Ostriches of some sort.
Those significant others may also be a bit lazy and smart enough to pretend like they’re an Ostrich, but in reality, know exactly what they are doing when they miss a bill payment and so they can let her take control instead.
She may also be a bit controlling, demanding, and may care too much about getting things done right.
Generally, she ends up handling all the bills, all the payments, and manages cashflow because she’s sick of nagging about incurring (unnecessary) bank fees or missing bill payments because it’s just stupid.
Motto: FINE. I’ll take care of it.
I was this at one point in my life (same relationship as the Breadwinner).
Boy couldn’t make a student loan payment to save his life, and didn’t seem to care that his bills would go to collections, and it would frustrate me to the point where I basically handled all the money in the household. EVERYTHING.
What tipped me over the edge was that he went out and blew $600 on booze on a credit card for ‘stocking the apartment’, when we had student debt to pay.
This woman is best represented by someone who may or may not insist on every joint expense being 50/50. At the very least, it has to be FAIR for both people.
Anything else aside from those shared bills, are for her to save in her own retirement account under her own name.
She also handles her own debt without asking anyone to deal with it (if she got into the mess, she better damn well get out of it), and she knows how to run a basic budget, even if she blows it once in a while.
Even if someone else handles her money for her for whatever reason, she’s on top of them to see where they’re investing it, saving it, and spending it.
Motto: It’s my life and my choice.
I reached this point more than a few years ago after college, and I hope everyone does at some point to see how it feels.
What works for me is 50/50, because I am not interested in becoming the Mommy any more. I like things to be clear and extremely fair on both sides.
I know how it feels on the other side and it SUCKS.
I do understand however, that someones you love someone who makes 3X what you do. You can’t possibly afford their lifestyle, and they don’t expect you to, so they enjoy taking care of you and treating you once in a while.
All fine and dandy. Just be sure that if you want to call yourself an Independent, you better be able to still be able to take care of your bills and yourself no matter what happens.
IS ANY CATEGORY BAD OR GOOD?
Sometimes you play both roles.
You’re the Breadwinner and the Independent. Or an Ostrich and a Golddigger Princess, or a mix of other roles.
Not all these roles can necessarily be pigeonholed as ‘Good’ or ‘Bad’.
Even being Independent can backfire, as it may not be what your future partner wants.
Maybe you have to scale it back a little from being so fiercely Independent (counting down to the penny), to being a bit of a Golddigger Princess so that the relationship works smoothly, and they don’t feel like you don’t need them at all.
It’s a choice that is made, and a social contract created between partners.
If you don’t accept the terms, change the contract or break it.
Otherwise, it is going to stay the way it is until you decide.
SO WHAT SHOULD WOMEN DO THEN?
Ask yourself questions like:
- What is my net income after taxes?
- How much should I save each month, if I wanted to save 10% of my net income?
- What am I spending each month?
- How many years before I retire?
Understand that your money is not going to run out and start multiplying if you don’t actively do anything with it.
Letting your debt take a hold of you to the point where you are resigned to being in debt for the rest of your life is dumb.
Letting your money sit and rot in your no-interest (or low-interest) bank account because you’re paralyzed with fear about learning about how to do something with it is dumb.
Saving is not a prison for your money, and where fun times go to die.
Saving is the key to your mental sanity and it will give you a confidence boost in yourself that you never knew existed.
As an example, I saved. A lot. When I worked that is.
(By virtue of my great job and my low and conscious living expenses due to budgeting and tracking where my money goes.)
Now, I have fun times by doing what I want, like traveling around the world, taking long work breaks and being happy, all while being under 30.
The key is to start somewhere. DO something.
I suggest you start by:
- figuring out how much you earn (net) each paycheque after taxes are removed
- start tracking where you spend your money each month
- analyze those monthly numbers
- create a budget
- stick to the budget the next month, while tracking where your money goes
- set goals for your money and life
- wash, rinse, repeat until you have a surplus of savings and/or you are getting out of debt
I grew up middle-class, and didn’t want for the necessities, but I certainly wasn’t flying around in private jets with my friends or walking into a walk-in closet the size of most of apartments (flip through this Tumblr blog: The Rich Kids of Instagram shared by the lovely Bridget of Money after Graduation).
All of their wealth is just mind boggling.
I’m naturally (and humanly) envious of course (who wouldn’t be?) at the weekly massages, private jets, wonderful vacations and a general feeling of luxuriousness in their lifestyles.
…but then I started musing out loud to BF about their life, and I came to this conclusion:
It’d be boring to do nothing and shop all day.
I obviously can’t test these theories out, but I have experienced a small chunk of it with lifestyle inflation, where I start getting used to little luxuries and I can’t go back to to the lower quality or lesser frequency of whatever I had treated myself to before.
So having all this money, being able to buy whatever you want.. this is all great if you grew up with absolutely nothing and appreciate the littlest of things, but if you have grown up with always having everything without having anything to want for, it makes life become boring.
By boring I mean: Bland. Unchallenging. Too easy.
Want a ride in a helicopter?
Yawn. I could buy that 15-minute ride with my pocket money. Hell, why don’t I just take dad’s helicopter out for a spin?
WOULD I WANT TO WORK IF I WAS RICH?
With all of this money that you could fill a swimming pool and swim in, why would anyone want to be challenged to work?
Now, I know that the super-elite mentioned above DO work to some degree (I think the Kardashians for instance, work a hell of a lot even if it seems like fluff), but when you read comments from the Ecclestone sisters where they seem to have half-heartedly tried to get a university degree (or not at all), it makes you wonder if all that wealth is wasted.
(A side note on the Kardashians, Kim Kardashian works like crazy to build her brand and business. I remember watching an episode with her stepsister who wanted to be a model but didn’t want to put the work into learning how to catwalk properly. In the episode, Kim said out of frustration: You have to work hard. REALLY hard. That raised my impression of her.)
Just like how youth is wasted on the young, wealth is wasted on the rich.
But the others? They could do so much more for themselves and to challenge their minds, aside from what they really DO accomplish, such as raising millions for charities.
I am not saying all rich kids are like this, but I wonder if I’d be just like them.
I would not only take everything for granted, but I wouldn’t WANT to work and to not be challenged. I’d want to sit around and just stare at my clothes all day.
COULD A FACTOR BE THAT IT ISN’T MONEY THAT THEY EARNED, THEMSELVES?
It’s just so easy to spend other people’s money, but a lot harder to make and save your own, although it gives a greater sense of satisfaction.
It gives me and many people a great sense of accomplishment to have reached such heights on our own (of course, there’s always support from society and family), but everything we have, we have it because we saw it as a goal and achieved it.
..AND TO KNOW THERE IS A SAFETY NET?
Then again, I know a lot of rich kids who grew up to work as hard as anyone alive, starting their own businesses with their own money and making it on their own.
The only thing is that they are probably still not as hungry. They know their parents would save them if things got really, REALLY bad.
People without parents who have the means, don’t have that comforting safety net, so they hustle harder.
DOES HAVING LESS, BUILD CHARACTER?
..or is it just based on the person?
I am sure on the flip side, there are poor people who are lazy as hell, just as there are rich people who work like maniacs.
Still, food for thought about what I’d do if I were filthy rich. I’m curious as to what kind of person I’d be.