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How much of my income should be allocated to housing?  What percentage of my pay should go towards debt repayment?  Savings?  Groceries?  These are just a few commonly asked questions for people looking for best practices when it comes to budgeting.  Vancouver Licensed Insolvency Trustee and debt expert Blair Mantin of Sands & Associates discussed these and other aspects viewers should consider, to support a successful budget.

Watch video, and read more below:

Why is a Budget Important?

For the eighth straight year, paying down debt is the number one priority for Canadians in 2018, yet just one-third of us operate with a monthly budget!

  • Meeting financial goals is near impossible without a budget – how will you know whether you’re on track?
  • One of the biggest mistakes people make when it comes to budgeting is not comparing their estimates with their actual incoming and outgoing funds.
    • A successful budget should be tracked, checked and revisited monthly.
  • The first step to making a budget is to track ALL your expenditures for at least a month.

Allocating Expenses in your Budget

Here is a breakdown of some of the main areas that a budget will entail and suggestions as to the percentage of your take-home (after tax) income each category would need:

Housing – 35%

Most financial experts recommend keeping your monthly housing costs within 35% of your total monthly budget – this includes mortgage or rent and all utilities.

  • Metro Vancouver residents may find housing costs to be one of their biggest challenges. It’s no surprise to anyone that housing costs in/around Vancouver are the number one ‘budget breaker’ that we see at Sands & Associates.
  • Caution: If you are considering moving out of the Metro Vancouver area to cut down on housing costs, don’t forget to factor in any corresponding increased transportation costs!

Transportation – 15%

BCAA estimates that the average compact car costs about $9,500 per year.  (For reference: the average BC resident spends $5,700 on groceries in a year!)

  • Many people underestimate how much transportation expenses really are, and as a result overspending happens frequently (especially if you’re not keeping track).
    • Take advantage of public transportation if possible.
    • Consider car-sharing options such as Car2Go, Modo, etc.
    • Before purchasing a vehicle, be sure to account for all vehicle-related expenses (Insurance, maintenance and repairs, fuel).

Food and General Living Expenses – 30%

Allocating around $250-300 a month for groceries per household member is a good place to start.

  • Food costs will vary hugely depending on dietary restrictions, shopping habits, and number of people in your household.
  • Staple food items tend to increase in cost annually thanks to inflation; help counterbalance these expenses by preparing shopping lists and avoiding impulse buys at the grocery store.
  • You don’t have to completely nix traditional ‘budget breakers’ like eating out, pricey coffees, and nights out, but be sure to allocate a piece of your budget to these costs if they’re regular ones for you.
    • Don’t guess when it comes to costs! Keep track to see how much you’re really spending.

Savings – 10%

Most financial experts agree – paying yourself first is key to accumulating savings!

  • When budgets are tight, savings are usually one of the first things to be cut…but a lack of savings can be a huge disadvantage during a financial emergency.
  • Set up automatic withdrawals to a savings account (even if it’s a small amount) each month so you’re saving something.
  • If your employer offers matching savings or RRSP contributions plans, don’t hesitate – always say YES to free money!
    • Did you know? RRSPs are one of the few funds that are safe from your creditors. Even if you file a personal bankruptcy in Canada, these funds are protected!

Debt Payments – 10%

Paying down debt continues to be a top priority for Canadians, and with 90% of us saying we have more debt today than we did five years ago, it’s no wonder!

  • Think about how much 10% of your income is – if you can’t make actual progress towards paying off your debt at this rate then it may be time to evaluate professional debt management solutions.

More about Sands & Associates:

An industry leader in debt management, Sands & Associates has been helping people get out of debt since 1990. With local BC offices and a team of committed debt professionals, we are the people you should contact when you want a plan to become debt-free. We know that money problems can happen to anyone, and believe that our non-judgmental and straight-forward approach to debt management helps to set us apart from other Licensed Insolvency Trustees.

Book your free debt consultation with a debt expert at Sands & Associates today.