Budget
Rent vs Own
For the last four years, I’ve been renting my apartment and have watched each month as my money is flushed down the drain. Now that I’m done school, and have a stable job, I’m starting to get into the mindset that I need to buy. Where I live, landlords can increase rent by about ~3% every year, and I just got the notice letting me know its going up to about $1000/month for rent.
Looking at my expenses, I’m now paying $1,029 each and every month, for a place that I don’t own:
- Rent: $975
- Electricity: $25
- Hydro: $0 (included in rent)
- Insurance: $29
While the rent is a lot per month (given the shoebox I live in), it does have its perks — I’m in the downtown core of a major city, have a great view, and the building is kept up nice, and I have almost no issues with my place.
But… doing the math backwards, I’ve spent nearly $40,000 on rent thus far — money that I’ll never see again.
With that said, I’ve been starting to do some rough planning on how much it would cost me to own… and I figure I’m looking at about $1600/month for the home alone.
- Mortgage: $1200
- Electricity: $25
- Hydro: $25 (assuming its not included)
- Insurance: $29
- Strata: $250 (plan on buying a condo)
- Property Taxes: $100
While its about $600 more each month, I can swing that — I’ve been putting $600 (or more) in savings the past few years as it is, in saving up for a down payment. So that part, shouldn’t be too bad. But its still a sizeable amount to be taken out of my spending each month — its basically 1 paycheque each month goes to housing alone. The bright side, of course, is that at the end of it, I’ll actually own something, and the money will be building me equity.
My plan right now, is to buy next year — but putting all this together, and starting to figure out what I need to make and live, helps paint a better picture of where I need to get to. I’m close, but another year will do the trick. And judging by how real estate goes, I’ll buy in the winter — so I’m a solid year out. Enough time to save more down payment, and figure out where exactly I want to live.
2011 Budget
I’ve found that over the past year, I had great intentions of following a budget, but never followed through.
While I’m typically not one to go out and just ‘buy’ things for the sake of buying them, I did manage to blow upwards of $500/month dining out for lunch and dinner – something that I’m going to change.
In 2011, my goal is to turn this around by actually packing a lunch and cooking dinner regularly, so that I can use the money instead to pay off my student loan (~$10,000) and max out my RSP contribution (~$10,000). I think its a pretty safe thing to say, that killing off my debt, and saving for retirement, is more satisfying than a half-cooked, over processed, foot long sandwich from Subway.
On top of that, I’m going to be more conscious of where I spend a month in general — not to a detailed level like some do, but in broad buckets. If I manage to stay within them, I’ll be on track to meet my above goals.
Monthly Income is roughly ~$3,400 after taxes
2011 Spending Budget (per month)
- Home Basics: $1,100
includes Rent, Hydro, Cable, Internet, Insurance, Cell Phone - Groceries: $250
currently spend ~$75/week, but expect to go up since eating at home more - Dining Out: $250
still a lot, but this is half of what I spent before - Convenience Items: $100
wide bucket, includes stuff like coffee, pop, snacks, transit passes, personal care, etc. - Entertainment: $70
fun stuff, movies, music/app purchases, etc - Other: $200
for anything random that comes up or is not covered above
Total: $1,970 /month
2011 Savings / Debt Repayment (per month)
- Student Loan: $600
currently sits just below $10,000 - Retirement Fund: $600
part of this will be withdrawn for down-payment for a home in next few years
Total: $1,200 / month
(this level amount alone doesn’t reach the $20k needed to pay off my student loan, and save $10k, but my annual bonus and tax return should bring me over the top)
With this budget, I don’t use up my entire salary to live — but gives me a general idea of where and how much money in each bucket I should be spending. After all of that, I still have ~$250/month remaining for my own choosing — likely, I’ll save this for a couple planned expenses down the road, like a new MacBook and TV.
Does this budget sound reasonable? Anything major I’m not considering?