Licensed Insolvency Trustee and Vice-President of Sands & Associates Blair Mantin was a guest on CTV Vancouver’s ‘News at Noon’ today. With a fresh year and new resolutions, January is the perfect time to start, or improve upon a household budget.
Watch the clip here, and read more below:
Blair shared some general guidelines as to the structure a successful budget should take, with these key budget areas and percentages of after-tax income allocations:
Housing – 35%
35% is the upper limit of what most experts would recommend in a monthly budget for housing costs (mortgage or rent and all utilities).
Living in Vancouver, it can be difficult to meet even this target of 35%, with many people spending more on rent or a mortgage than they would have to if they lived elsewhere:
- Options such as hosting homestay students, or considering a roommate can help to reduce this cost
- If you consider moving, be careful that additional transportation costs do not offset any savings in housing costs
Transportation – 15%
This is another area where overspending is common. Most of us greatly underestimate how much it costs us to get from point A to point B.
- If you’re able to use transit, you’re ahead of the game as it’s near impossible to spend more on public transit than you would spend if you owned a car – BCAA estimates that the average compact car costs around $9,500 per year!
- Consider all of the costs of owning a car: Gas, insurance, maintenance and repairs, depreciation, etc
- Is 2017 the year to embrace car sharing? Options abound in Vancouver for short trips, long trips and everything in between. Consider Car2go, or Modo Car Co-op as good, cost effective options
Food and Other Living Expenses – 30%
Food costs can vary widely depending on your diet, shopping habits, affinity for couponing, and size of your household.
- A good estimate is about $250-300 per household member for groceries each month
- While you can’t do much about the increased cost of ‘staple’ items, this category also includes some budget killers like eating out, lattes, taxi rides, nights out, etc
- The key is to track this category accurately – consider whether an app could be helpful, or even try ‘giving yourself an allowance’ by putting money in a separate account for food and other living expenses each month
Savings – 10%
Saving money is usually the first thing that goes to the wayside when money is tight. It is also hands-down the number one factor that will determine whether you will achieve financial success – Can you save money each month?
- You must pay yourself first, by setting up automatic withdrawals into an account. Otherwise, there will never be enough money left for savings
- RRSPs are the only funds that are safe no matter what, so, even if you aren’t debt-free, you should still be making contributions to your future:
- Previously most workers had company pension plans and didn’t have to worry about this
- Now, more than 11 million Canadians are without company pension plans. You are your own pension plan
- Many companies also offer matching of contributions – always say yes to free money!
Debt Repayment – 10%
Over 90% of Canadians say they have more debt today than five years ago. According to a recent study by CIBC, top priority for 2017 is to pay down debt.
- Many people fall into an ongoing trap of ‘financial Tetris’ where they are using one card to pay another. Though they might feel great about taking action on their debts, they may not be getting any further ahead if they are just shuffling money around between cards or lines of credit
- Consider how much money 10% of your income is. If your required debt payments are much higher than that amount, you should investigate whether professional debt help is beneficial
With over 29 years of experience, Sands & Associates is BC’s largest firm of Licensed Insolvency Trustees focused exclusively on assisting individuals and small businesses achieve their “debt free” goals.