This & That – The Balanced Life Edition
Posted by Gail | Filed under Balance, This & That
After spending ourselves into the hole, there seems to be a major trend to getting all the debt paid off no matter what. While I believe very strongly that you should do whatever it takes to become consumer debt free in three years or less, people are extending the rule to their mortgages, which I think is ridiculous.
I’m all for getting to debt free forever. And being mortgage free by the time you retire is a very good goal to have. But busting your butt and having no fun shouldn’t be the path you take to get to mortgage free. And if you’re in good financial shape and have a partner who wants to have some fun, but you’re always raining on the parade, you may end up splitting all that money you squirreled away in half when your buddy finally has had enough of your miserly ways.
Margaret wrote:
Gail, my husband and I have $100,000.00 left on our mortgage. We will soon be bringing in an extra $600.00 a month since we will have paid off our line of credit. I would like to increase our mortgage payments by $600.00 a month using this money. I am trying to convince my husband that this is the best way to go, but he says he would rather use the money for vacations! Can you tell me how much time we would save on paying back our mortgage if we put in an extra &600.00 a month (we are paying 5.5% interest)?
Margaret, m’love, you would save a lot! But I’m with your husband. If you’re just down to your mortgage, you should be having some fun. Why don’t you compromise. Add an extra $100 a month to your mortgage payment, and set aside the other $500 a month for other things like vacations.
Melanie wrote:
We’re on one income as I left the workforce mid last year to have a baby. A year before the baby was due we planned to sacrifice my whole income into our mortgage (a total of $40K). My husband is still keen to put 50% of our income in the mortgage which means after all fixed expenses we have $1400 for variables. This is ok as it seems enough for us to get by comfortably with our day-to-day living and raising a baby – however as all the extra money is going into the mortgage we don’t have physical “cash” savings. We’ve managed to accumulate over $80k in our mortgage redraw facility due to this commitment. I’m getting concerned now as we are close to paying off the mortgage ($66K to go)… but once it is paid we won’t have the redraw facility in case of emergency. What should we do now? Have we shot ourselves in the foot by being too scrupulous with our mortgage repayments? Also, I’d like to know where/how I should budget for education costs and the associated expenses as I’ve just returned to study?
Melanie, you haven’t shot yourself in the foot and should be very proud of what you’ve accomplished. But it is time to balance your financial foundation. So I would hold off on further mortgage pay-downs… other than regular monthly payments… and focus on building up the emergency fund. Figure out what your essential monthly expenses are (I think you already have a good handle on this) and then set aside six months’ worth of cash in a high interest savings account to cover your butt. As for how to budget for your education costs, I’m not sure what you’re asking me. If you want to know where to put it on your budget, it’s a LIFE expense and you can replace any other LIFE category (like allowances, for example) to make the budget worksheet balance. If you’re asking how to budget for these new expenses, they are planned spending. You need to figure out how much a month it’ll cost and then set aside that amount so the money is available when the payment must be made.
Chloe wrote:
Do you have to ever counsel anyone who is too cautious with money and what would you recommend? I am single, in my thirties and live with a retired parent. I help them financially as they have a very small pension income. I have a mortgage balance left of 70,000 from purchase price $186,000. This was accomplished within 5 years with 25 % down and taking advantage of lump sum payments. I also have an 18-month emergency fund and about 31,000 in RRSP savings. My household income after taxes is about $46,000 so I am not rich. How did I accomplish this? I have not been on vacation in 6 years, work overtime at every opportunity, take advantage of my works RRSP match, limit going out to special occasions only, bring lunches to work, I never grocery shop with out a list and often plan my menu by looking at what is on special that week, saving money is budgeted into my monthly expenses and I shop for new clothes only when needed. I started saving since my early twenties. This probably sounds more like a success post but I have recently started to realize I am missing out on enjoying life. I would love to find the balance between saving and enjoying my self too. I come from a very poor childhood and never went to go through that again so I believe that is what makes me so cautious.
Chloe, the thing you have to do is decide on something you really want to do (or have), set a goal… how long it’ll take you to save the money, how much you’ll set aside each month, etc… and then ENJOY spending the money. You sound like a very responsible girl. What do you do for fun? Do you have a friend who you would like to travel with? Have you ever considered doing something completely out of the blue? Life is not simply duty… there is also beauty to behold. You need to look around and decide what Chloe wants to do and see and hear and experience.
Daphne wrote:
I watch, read and follow your advice and also the advice of Suze Orman. I own a condo in Regina, which was paid in full when I purchased it. (it’s tiny, but it;s mine!) Also, my car is paid in full. However, I have almost $18000.00 in a line of credit. Using the cups idea of yours, I can easily pay $1600.00 a month to debt. (Using your chart of 30% housing expense and 15% debt repayment…because I have little housing, I shifted that over to debt repayment) My question is: lately, Suze Orman has been telling people not to pay consumer debt and instead to put that money in a savings account. You both have always said to pay down credit card and consumer debt as quickly as possible, until now….Should I be more concerned with getting my savings account higher, even if it means longer to pay off my line of credit? (the interest rate is 5.5%).
Daphne, I’m not sure why Suze has changed her tune, but you should still be working hard to get your debt paid off as soon as possible. Your plan makes good sense to me. This assumes you also have an emergency fund in place (you do, right?). If not, then you should be socking away some emergency money every month… start with $500 a month, and once the debt is repaid build your emergency fund to 6 months’ essential emergency expenses. Then have a great life!
L wrote:
My husband and I were in $21000 of credit card debt (some of which was for fertility treatments so we could have our daughter). We really buckled down, due in large part to watching your shows and me basically being totally focused about getting out of debt. This month we we will pay off the remaining balance of this credit card debt. We have a mortgage ($1015 a month), but aside form living expenses we don’t have any other debt (no car payments, loans, etc). I have tracked our budget (using your advice from the shows) and we need $3000 a month to live what we feel is comfortable. This will go down as our ten month old daughter grows and doesn’t need the special $30 16 oz can of formula she’s had to stay on. My husband makes about $4200 net a month and I make $1475 a month. I would really love to be able to stay home with her the next few years and not have to take her to a babysitter. I realize the extra income would further us along financially and give our daughter a better future in that respect, but the maternal and emotional side of me really wants to be home. In your opinion would you think it be possible for me to do this? We currently have $4000 in our emergency fund. Thanks for all your help and advice.
Hey L, you answered your own question my love. His net income is $4200 an your expenses are $3,000. That leaves enough money to save $420 a month for the long term, $120 for your daughter’s future schooling, and $260 a month for emergencies, leaving you with a whopping $400 a month to play! I know that there are a lot of people who are so gung ho on preparing for the future that they are willing to sacrifice everything today. I am NOT one of those people. If you have no debt, if you’re not spending more money than you make, and if you’re saving, in my book you’ve covered the basics and you can make your life anything you want it to be! If you want to be a stay-at-home mom, be a stay-at-home mom. Keep in mind that you don’t have a lot of wiggle room for fancy vacations or expensive toys. And you need to set aside a little money each month to take care of the “big spending” that will eventually creep up… a new vehicle, for example. You should also take the opportunity you have while your daughter is young to build some new skills: learn to sew, build websites, fix trucks, make fancy cakes. Your brain needs to keep expanding, and when you do finally decide you want to return to work, it’d be nice to have some new skills to put to use, wouldn’t it.
Allesha wrote:
I am 30 yrs old and my husband is 32 yrs. We have a 17 month old son. We were married in 2005 and my husband moved here from the USA. We purchased our firts home in 2008, and from the minute we purhase our home we have being having financal problems. My yearly salary is $35,000.00 my husbands salary is $40,000.00. These are our expenses:
- Mortgage that includes Lnds tax & Life and disability insurance $842 bi-weekly
- Daycare $800
- Car payment $432.00
- Car insurance $250.00
- Rogers $300.00
- Gas$ 400.00
- Grocery $500.00
- RESP $100.00
- Credit Cards $500.00
- Life Insurance $200.00
- Hydro $130.00
- Electricity & Water every 3 months $300.00
- If you calculate, our monthly expenses are $5, 296.00.
My husband is always working, we never spend time together as a family because he is always doing overtime so that we can cover all our expenses. I just really need your help and advice as what should we do now. I consider us selling our home and start all over again but that’s not the route I want to go by. My second option is to get a part time job evenings and weekends but then I won’t have anyone to watch the baby. I am slowly having a nervous breakdown and I don’t know what to do know. I am in desperate need for some financial advice.
Okay y’all, it’s your turn. What would you recommend to Allesha? And if you want to weigh in on any of the other comments I made, I know you’ll have loving and supportive words of wisdom that will help!
June 9, 2009 at 6:53 am
I think Suze Ormand’s advice regarding savings is because many credit card companies in the states are reducing limits or closing cards on people once they pay them off, so while the economy is really bad it is more important to have a cushy emergency fund (8 months worth) and make minimum payments than to pay off debt. It is becuase you can’t depend on the credit card for emergency fund. She said it is only because of the current economic climate, because she usually advocates paying down debt first.
About the budget. $500 on groceries a month for two people? (plus a little one but they don’t eat that much). I would re-examine the grocery list. We spend about 300-400, more if you include the cat food, cat litter, etc, but not that much more. And that is buying “some” junk food like frozen pizzas. Buy bulkbarn rice and beans, buy frozen veggies. There are lots of ways to save money and eat healthy.
Also, $400 on gas? wow. I would consider transit. Plus, the car payment is huge, when you factor in the insurance. Perhaps a cheaper car that is better on gas?My husband takes the bus to work and we save over $100 a month on parking and only put between $40-80 a month of gas in the car.
Another thing is the cell phone bill. Do you really need to spend $300? This is the age of internet, couldn’t you skype or IM for those “long” talks? We spend $80 for two phones (plus our land line) and think we are being gouged at that price . Do you have cable? Get rid of it. Many shows can be watched online. Our landline, cable and wireless internet together is $133, and with cellphones it comes to just over $200, and that includes hundreds of channels, so why are you paying so much?
Also, you have no savings. I would be putting that $100 in an RRSP or emergency fund instead of an RESP. Even with the child tax credit. If owning a house is straining them that much then I would consider selling it. $1684 a month is a lot for lodging on $75,000 a year. Unfortunately, you would have probably lost all the money you put down in closing costs. We pay almost $1200 on lodging not including utilites and find that difficult enough (we spend %40 of our income on it instead of the magic %35), and we bring in the same amount of money. I mean, the utilities plus housing costs are huge!
The biggest issue here is housing costs I think. Even if they wittled their budget down in other areas, wow! I am on maternity leave and we are living off my husband’s salary of $71,000 and while things are tight, (and we have a lot of debt) we manage to live within our means even with higher than desired housing costs. So, I couldn’t imagine how panicked this lady is feeling. Those stupid banks, when they offered us a mortgage, it was way more than we could ever afford. What are they thinking?
June 9, 2009 at 7:38 am
Rosie, when you say those “stupid banks” you are referring to the PERSON you dealt with to get the mortgage…we are not stupid…we tell you how much your payments would be with certain other expenses factored in based on your income…it is then YOUR decision to decide if you can AFFORD it…ultimately YOU decided you could afford a payment of x amount for x number years on x principal….if that was a STUPID decision it was yours not the banks…
Other than that last sentence in your post you sound very smart and your advice was great:)…
Allesha, you can see if you can reduce your mortgage payment at all to help with cash flow…if you have extra you can always lump sum it onto the mortgage but the committment would be smaller…sometimes there is room to drop the payment amount without changing the amortization…also that Roger’s bill is huge…you really should revisit that…and the car and gas…another place you could probably trim…also, check with those credit cards and see if you can reduce the interest…perhaps there is a bank account with less fees for you…you probably won’t find one large sum to help with cash flow…probably it will be the trimming of several items at small amounts that will add up and give you that breathing space…good luck and God Bless:)
June 9, 2009 at 7:38 am
I agree with Rosie. Her costs seems to be pretty high in most areas. Time to cut back, maybe? I think the car insurance is pretty high too? Having said that I don’t live in the city and am not sure what they are like there and even if she lives there. Rogers at $300.00 a month?! Thats crazy not matter what it’s for. Way too much. Cut that back to the bare minimum. Thats a high price to be paying for as stressed out as you are. Hang in there. You can change you situtation with some hard work and sacrificing. It’s worth your mental health! And it does improve your mental health! Am I right about that guys?
June 9, 2009 at 7:55 am
Great advice Gail. My wife and I just went through a similar exercise of exploring our options to try and be mortgage free and in the end we decided to bank the cash instead.
First we looked at how much we could “afford” to pay extra on our mortgage to pay off our house. We were all set to knock years off the mortgage when that “haha” moment struck. Instead of raising our payment every month and forcing the repayment, why not bank the cash every month and when we have enough for a large payment then make it?
You see, while our house is first our home, it also plays a significant role as an investment tool for our retirement. The fact is though that house prices do sometimes go down, and you never know what price your own house will fetch when you sell. We both have pension plans and RRSPs and equity in the house. What we didn’t have on hand is CASH. So, to provide even more balance, that extra payment we were going to make is now being stashed away every month and when it grows to the point that we can make a large payment, we will then decide if we will or not. We like having options and stashing the cash provided us with that option.
This makes more sense to us. Especially since we have no plans whatsoever to stay in our current home.
June 9, 2009 at 7:59 am
That is a gigantor mortgage- almost as high as ours and we have double the income!
Rogers, groceries, car costs (payment + insurance + gas) could all be cut, but that mortgage is going to weigh on you for a LONGGGG time.
June 9, 2009 at 9:00 am
I think others have sufficiently covered the trimming of costs, so I’m going to make a couple of recs regarding “make more money”…
Do you have room to take on a renter/boarder?
You could explore part-time work you can do from home, or do some evening/weekend babysitting (or respite care) where you don’t have to find separate care for your son.
June 9, 2009 at 9:00 am
Another thing I noticed in addition to what others have seen is that their Life Insurance costs seem high – they are paying for Life on their mortgage, but also $200 separately. If they have enough independent coverage (and they may also have some through work), they should think about dropping it from their mortgage to reduce their costs.
June 9, 2009 at 9:22 am
Just to reiterate that Suze Orman did change her tune about debt repayment because things are much worse in the U.S. Rosie is correct. Suze is recommending, for the time being only, to keep any extra cash you may have because so many couples are down to one income in the U.S. because of job losses. Make your minimum payments so you keep up a good credit rating but hang on to extra cash. When your cash flow improves again, begin chopping that consumer debt down again.
June 9, 2009 at 9:26 am
While my comment to Allesha is aessentially the same as others’ – reduce your variable expenses and cell phone, cable costs (if you consider that a fixed expense, I also wonder, Rosie, why you call it “tight” when two people have an income of $71,000 to live off of. I personally make about $2000 a month and manage to live well enough with that. Yes, in my case things can get tight – my monthly rent is 40% of my income, so I have to watch how I spend the rest of my money – but with $71,000, you have almost $5000 after taxes to live on, and that’s only half of your normal income! How can that be “tight”?
June 9, 2009 at 9:59 am
Aleesha, your costs seem quite high for Rogers & Grocery. For car insurance, there are a lot of factors that play into the costs – there has been time when ours has touched $500 a month, after a few tickets & an accident… But if you have a clean record and a reasonable vehicle, there is no reason why it should be that high. Gas seems high, but if you are both commuting to work, maybe you can figure out a way to use your vehicles less on your personal time.
The $500 for groceries for 3 people seems excessive (at least where I live in SW Ontario). My budget for a family of 5 (soon to be 6 in July) is $600, which includes toiletries, cleaning supplies, extras for holidays etc. We shop the perimeter of the store – fresh fruits & veggies, unprocessed meats, dairy… Also look into whether your health unit has a Garden Fresh program – for about $15 a month you can get 2 weeks worth of fresh fruits & veggies once a month. Our family gets 2 boxes and uses the grocery store & farmer’s market to supplement the basics that we get through the program. It isn’t just for low income families, either, just people who want to purchase fresh produce at wholesale prices.
Rogers isn’t a fixed expense it is one that you have a LOT of control over, by UNSUBCRIBING to ALL of the extras. In my mind, cable is NOT a necessity, we’ve been going without it for 5 years. Cell phones should be treated as emergency use only, so you should be able to get the phone plan down to under $$90. Home phone is something you’ll have to question too – how you are using it. So I am thinking that having a rogers bill under $150 is very reasonable.
Also, your numbers aren’t “real” have you tracked your actual expenses? Rounded numbers don’t really help you see the real picture, since you’ve left out a lot of the categories that you are likely still spending in. Even your salary – I am assuming that you are listing them as gross, when you really need to budget with what you are actually taking home… I don’t think it was the home buying that put you in this, it is a simple case of spending more than you are making. If you are a fan of Gail’s then you know there are only a few options to get yourself balanced – spend less & make more money.
So cutting at least $150 off each your grocery & rogers bills = $300
Getting a job 2 evenings a week (yes that means getting some childcare) COULD be an option, if you can handle that. How much would you be bringing in after paying for childcare (since your dh is working & isn’t available to take that for you). Maybe you could offer childcare for families working for Saturday mornings, or Friday nights… one or two children a week for an extra day might be the difference.
2 children @ 30 a day x 4 weeks = $240 a month OR you could get a pt job & swap childcare with another mom in the same position – she watches your little one 2 evenings a week & you take hers another 2 days.
I would defer your child’s RESP, like previous posters mentioned, that should be going into savings & emergency fund for you right now.
Your credit card debt is a big chunk of your monthly expenses (over 10%) – is this minimum payments or have you figured out already how to pay them off in 3 years? You can’t afford to be paying it of every month, so they should be on ice. Please don’t touch them – they are not an emergency fund, like the companies would like to have you believe.
So with Rogers, Groceries, childcare – that $540 “extra” a month should be going to pay down debt & savings, plus the $100 savings from the RESP. I think that once your credit card debt is paid in full, you will be in a better position to add that money to your child’s RESP and your own savings.
I may be the only poster who says don’t sell your house… It may have made your financial difficulties more apparent then when you were renting, but now that you are there, the bills are on the high side to stay there, but not impossible. When you fix your other expenses like I’ve mentioned (& other posters) and get rid of your debt, it will feel much more managable. I just don’t think it was the cause of the problem…
I agree that this situation isn’t insurmountable – but make a plan & stick with it. Take a deep breath.
Let us know how it all works out for you.
June 9, 2009 at 10:09 am
Also – wondering about your Hydro – $130 + Electricity & water – $100 a month – your WATER is costing you $100 a month???
You didn’t mention whether your taxes are part of yoru mortgage payment. Can you change your payment to once a month & skip the extra payment a year that it is costing you until your cc debt is paid off?
June 9, 2009 at 10:14 am
Why are you paying life insurance on your mortgage as well as $200 a month for a separate life insurrance category. You need to examine if you need both of these policies and maybe axe one.
Also, groceries should be able to go. we are a family of four and can usually grocery shop for about $400-500 a month so two adults should be able to eat for much cheaper. a 17 month old really only eats the scraps from the parents anyway!
The rogers bill could be cut wayyyy back. $300 a month is ridiculous if they have that many expenses and not enough income. Do some shopping around if you need to keep everything. bundling packages is not necessarily the best deal.
June 9, 2009 at 10:17 am
My advice for Allesha is this: investigate starting a home business. My wife and started a home-based wellness business a couple of years ago and it is one of the best things we’ve ever done. One of us has always been home to care for our young son. Our marriage is a lot stronger because we have worked as a team to build a business that will last a lifetime. We’ve also met a number of wonderful people along the way.
Financially, a home-based business makes a lot of sense. We’ve increased our net income by thousands of dollars a year through tax advantages available to those people who are self-employed.
Of course, I would encourage Allesha to do her homework. There are countless companies promoting themselves as “work from home” options. Some are more reputable than others. Perhaps Allesha has an existing skill or hobby that she could develop into a business? At any rate, we’ve discovered that running your own business opens a world of opportunities!
June 9, 2009 at 10:19 am
I’m assuming that the income figures are gross, not net after taxes and deductions. Otherwise, Allesha’d have about $1000/month extra. But without knowing what the net is…
What is Hydro? She has Electricity and Water listed separately.
As others have pointed out, Rogers and groceries are way too much. 2 cells (emergency use only, so this could be less on pay-as-you-go) 60, basic telephone 25, basic internet 40, basic TV 50 = 175, leaving 25 extra for variable stuff like long distance = 200 total.
There’s probably at least 100 bucks that can be shaved off of the grocery bill. (2 adults $300, leaving $100 for the kids).
I’m assuming A has 2 cars, but the insurance is still a bit high – has she consolidated with her house insurance for some extra savings?
The credit card payments are also really high, so if that’s all interest, any remaining money should go toward paying that off pronto. That’ll eventually free up the entire 500 bucks.
This will reduce the budget by at least 700 bucks/month. But in the short term, she may have to suck it up and deal with husband’s overtime and maybe get a part time job to get the credit card paid off.
June 9, 2009 at 11:01 am
Sparky, OK, stupid was harsh, how about unwise?, offering people more than they could ever afford. To the average person (myself included), we “trust” the banks and figured, if they give us that amount, then we must be able to afford it. Lucky for me, we did run the numbers and knew that at the top amount we’d be choosing between shelter and food. Yes, people must make choices, and are ultimately responsible for their decisions,but given the current economic climate, that hasn’t been working for individuals, banks, or the economy. Don’t take it personally, unless you are personally responsible for bank policy.
You know what the kicker is? The bank was dangling this huge sum of money at us willy nilly, yet when we applied for a small business line of credit ($1000), to generate income, with proof that we would be generating well over that (and could afford the loan even if we didn’t), they wouldn’t give it to us. So, $1000 with a responsible conservative business plan, no, $250,000 when we clearly can’t afford it, yes? Seriously, who writes these policies? /done rant
Rhiannon, I am a graduate student, and with 13 years of university behind me (on an unpaid/no benefit maternity leave) and my husband’s 13 years of university, you can imagine we’ve accumulated some debt. We don’t have much consumer debt, except for our car. I have another 6 months or so of my degree (PhD) (paid but after tuition not much left), and then a year of unpaid clinical training. Luckily I will have the option of a very good salary when I am done, so time and money wise it will pay off in the end. I’ve also opted for the MMM route and we have a small side business that is breaking even at this point and by next year should start turning a profit.
When I graduate and get a “real” job, we should be able to pay down our student loans in about 2 years. We live modestly, and have paid off almost all our consumer debt, which we accumulated during poorer times. I am not making excuses, we clearly didn’t understand the basic principles of money management but we are taking responsibility for our mistakes. So, yes, even on a larger salary, things can be “tight” when you are a 30-something trying to make up for lost time with retirement savings, emergency savings, and over $60,000 in student debt.
Cheers!
June 9, 2009 at 11:03 am
Allyesha could quit working and stay home with their child in addition to cutting costs as others have mentioned. This would mean a savings of $800 a month in childcare. Getting a second job so she would be spending even less time with her baby is not the route I would go. Why spend all your time away from your loved ones so you can afford a house that’s crippling you financially?
And yes, I wholeheartely agree that Rogers and Grocery line items can be signficantly reduced. I couldn’t buy $500 worth of groceries for two of us if I tried! Buy whole foods and cook regular meals. Hubby could be taking lunches to work as well, make coffee at home, eat minimal meals out…etc.
But really, it might be even easier for them to consider moving out of that house and buying something more affordable for the time being.
June 9, 2009 at 11:08 am
Crunching the numbers further I realize that Allesha will need her income. Perhaps she can find a part time gig that she can do from home when it suits her, allowing her to still have an income and allow her to save the $800/mo on childcare.
Also, the car alone is costing them over $1000 a month, egads! Perhaps they should consider moving closer to work, getting a less expensive car that’s paid for already and/or use alternate modes of transportation. Yikes! My monthly car costs are less than $200. Mind you, I bought my car with cash and work from home so I use about $40 worth of gas a month and my insurance is about $150/mo.
June 9, 2009 at 11:10 am
The areas I see the ability to cut are:
Rogers – cancel completely or cut back. If they threaten to charge you a cancellation fee, consider the long term cost – you’ll likely save in the end.
Electricity, Water – find ways to cut back (I’m doing this too)
Gas – is there a way you can carpool with neighbours or students in the area? Now that the weather is getting better (slowly) can you walk more, or bike more? Or use public transit more often?
Grocery – They are probably ways to cut if you examine your grocery bill.
Are you meeting with a Gail club? I find the tips helpful from everyone in our Gail club!
June 9, 2009 at 11:18 am
Looking at the case study, I would make one first suggestion to Allesha: aren’t your monthly expenses more than your net income? My family makes less than Allesha’s, but we’re in roughly the same tax bracket, and I’m pretty sure that when you take off taxes plus CPP and EI that you’re short right away.
The next thing I noticed is that her monthly expenses don’t allow for extra things. Where does money come from for birthday presents, car repairs, paint for the house, new clothes for the baby, a daycare field trip, or even just an occasional coffee or ice cream treat? What about one time bills, or planned spending, like tune ups for the oh so expensive car, furnace cleaning, and Christmas? This could be a reason that they always find themselves playing catch-up – because they’re not counting anything that doesn’t happen every month.
I think she needs to come up with another budget, one that takes into account net income and actual expenses, like clothing, medication, and dental visits.
I also think they need to both lower their expenses and make more money.
As a family, she’s spending $1,032 a month in transportation. Between the car and daycare, that’s almost half of their net salary. They need to lower their transportation costs, either by trading in their car and getting a much cheaper one to get rid of that horrible car payment, or by altering how they drive the car, to get rid of that horrible gas bill, or by doing both.
Her mortgage is also very high. If she really wants to sell, Allesha needs to check with a real estate agent first and make sure that a) it won’t cost her more to sell than it would to stay and b) that the upgrades required to sell her house and get her money back won’t cost more than the profit she’d be making. Are they thinking of renting to lower their housing costs, or buying into a lower market? If she hasn’t been counting house maintenance into her budget (and it isn’t there), then it’s possible that her house will need more money put into it to make it sellable than it will make.
If she does decide to stay, can she take in a border or tenant? Does she or her husband have a talent they can put to use as freelancers, like proofreading resumes (which I do for a couple of extra bucks now and then), scrapbooking, photography, or babysitting? Then they can still stay home with each other and their baby, but also be making some money.
What about canceling cable, canceling cell phones or doing pay as you go (which Rogers will let you do, even if you’re on contract, you just have to pay a $50 fee), just living on a landline, and switching your internet to the cheapest high speed you can find? Or even dialup? Then you can use the money you save and put it towards starting emergency and savings funds. Every dollar counts, even if you’re only putting $50 here and $25 there.
Finally, if you’re paying $200 a month in life insurance, why in the world are you paying life insurance on your mortgage too? At your ages, if you’re non-smokers, $200 will get you a heckuva lot of money, and you really shouldn’t need to have your life insurance through your mortgage too. Also, you should check your mortgage life insurance terms too, as it may only pay your mortgage for 1 year, not pay it off entirely.
To sum up: make a more clear and definitive budget using only your net income, lower your transportation costs, lower or supplement your housing costs, and get rid of luxuries in order to build up savings and emergency funds.
What do you think, Gail?
June 9, 2009 at 11:32 am
Wow. This is off track a bit but-Where does A live? I live in Saskatchewan, & here I can spend easily $500 a month on food ( & cleaning products etc.). And that’s driving an hour to Regina to Superstore. If I just bought locally at the Co-op, it would be much higher. We are in our 50’s & just the 2 of us. We do entertain , maybe once or twice( or three in the summer) a month. I shop the perimiter of the store & spend the bulk of our food money on fresh produce.. organic if available. In the small town I live in, I ran out of the organic greens we eat every day & it cost $8 to buy it locally. I nearly choked, but it was for something healthy.. not frozen pizza, so I bought it. If you live in rural Sk, it’s at least 30-60 minute drive to…anywhere, so vehicle expenses are high. I think knowing where someone lives ( generally) helps in order to give sound advise on how to cut back expenses.
June 9, 2009 at 11:42 am
+1 for dropping insurance through your mortgage. Call today and kill it. You are getting hosed. The worst is declining balance mortgage insurance (the kind where if you die the mortgage is paid off but the premiums are always the same). You are paying too much for insurance (keep in mind this is different than saying you are covered for too much insurance) most likely.
My suspicion is that realistically, they need to either sell their house and hope to get out at $0 loss/profit or get another job. Quitting her job isn’t adviseable since its hard to get back into the workforce after an extended leave (excluding certain professions, such as teacher perhaps). Saving $20 here etc isn’t going to cut it; more radical action is clearly required.
June 9, 2009 at 11:43 am
As all have mentionned, the Rogers bill is high and needs some attention.
One area were I have problem with is insurance (I am a financial advisor), for your age it’s high , what kind of life insurance permanent or term? this needs to be looked at you could save a bundle and like a suggestion was made combine it with the mortgage insurance a lot better deal, and also find a good broker to help you out.
June 9, 2009 at 12:20 pm
Groceries! A’s figure seems quite reasonable to me, with that price they must be eating fresh, quality ingredients cooked at home. Around here, buying fresh and wholesome for 3 meals a day is outrageously expensive. In fact, after our mortgage, groceries are the second biggest expense, and that’s buying bulk, shopping the flyers, a keeping to a list, meal planning and bargaining with the grocery manager over nearly expired items, and skipping meats or cheeses sometimes.
I do think their Rogers bill is a luxury item (I survive fine without a cell and cable is just a distraction most of the time).
The car/insurance/gas numbers are higher than I would be comfortable with, but I am blessed with being married to a mechanic, so we can buy a cheap little import car, run it on basic insurance and still have reliable transportation.
The daycare is the going rate for sure, a hard pill to swallow, but you need a safe place for your children when you are working hard to pay the bills!
If they would be capable of using their house as a place to make money too (like that post Gail did recently), that might help too.
Really, trimming the fat and really evaluating what they want to live like is the only option. If they feel they NEED the car and the cable and the cellphone, then they have to sell and go back to renting. If they want the house more, they need to cut the luxuries and suck it up.
June 9, 2009 at 12:22 pm
re: Allesha,
-why are the credit card pmts @ $500? Is this her monthly minimums (!) or is she making extra?…if it’s minimum…then cut the Rogers bill at least in half to $150..sounds high still(go with basic cable, basic cell, basic internet)stop shopping and cut the credit cards up.
-guaranteed she can cut at least $100 from the groceries a month..she’s most likely buying a ton of convenience-style foods with that price and she should be shopping smarter in this area…
-look into if she can go part-time and stay home with the baby during the day while working evenings and weekends when hubby can watch the baby. Might have to switch careers for a bit, but they’d save the $800 completely and she’d have time during the day meal plan properly and grocery shop, etc…and of course, spend tons of mommy time with the baby….this alone should reduce the stress. : )
June 9, 2009 at 12:48 pm
Your housing costs look really high to me. About $2000 per month for morgage and utilities seems like a lot. I don’t know what city you live in, but from my knowledge of Vancouver I’d bet you could rent a two bedroom appartment for half of that. One of the great things about appartments is that lots of the utilities tend to be included (I pay only hydro and it’s only $20/month b/c of the small space).
Appartments also often let you move closer to work which allows you to cut down that crazy gas bill and the shorter commute would let you spend more time with your husband.
The decision not to own your house is controversial, but I’m of the option that it’s a poor decision for many people. The media will have you belive that buying the best financial choice for everyone. It’s not.
And what on earth is with the $300/month Roger’s bill? Where I live Roger’s means internet/cell phones/TV/home phone. Am I interpurting this correctly? If so, that is too much money. If I were you I’d cancel your cable (or go to basic only if you can’t live without it) and simplify your phone situation. If you are worried about money and one of you has an iPhone – so help me god.
June 9, 2009 at 12:53 pm
Hi Rosie,
Times have changed in the bank…we help clients see the bigger picture when we are dangling that number…that way they can make a better decision…when I have folks come to see me about what they qualify for I always turn it around a bit…I ask them what their wants and needs are in a home…then I direct them to look for that type of home in our weekly real estate news to see what it would cost them to buy…then I take that number and see how it works into their budget…much more realistic that way…
Also, the 500.00 bucks a month on groceries would be a dream come true for me…we have a family of 4 and I have gotten the budget down to about 1200.00 from 1500.00 on food…this is just what’s spent at the grocery store…we don’t eat out much…I plan the menus weekly and shop only once per week with a list…some household products are included in that price as well but not all of them…the 1200.00 is mostly edible..lol…and as an aside we also spend a fortune for water…huge tax on it here where we live…maybe it’s our northern location that’s costing us…my grocery bill is comparable to families like mine…oh and our combined income with me working and my husband on disability is not quite 50k…we are down to just the mortgage at 100k so all is well…finally…we do have a handicapped child as well so retirement planning has to include him as well as he will always need to be supported…the other son has a healthy RESP we contribute to…we make it work and with all this great advice Allesha will too:)…great advice and examples on all these posts!
June 9, 2009 at 1:02 pm
@ Sparky, for your son with disabilities, I would recommend looking into the Government savings programs available to him – somewhat like an RESP with similar (better, I think) governement contributions… I can’t recall the name, but I am sure that someone here will be able to help you.
June 9, 2009 at 1:09 pm
Allesha, sell your house because it is killing you. Buy another one later.
June 9, 2009 at 1:14 pm
My friend Jane was in a similar predicament to Allesha. She was renting two floors of a house in a swank neighbourhood in Vancouver, had two kids, two cars, a nanny and both of them worked. They were always a little farther behind every month. They visited a financial advisor who gave them advise that they took to heart and they are so much happier and are getting ahead financially.
They moved to the suburbs, are renting an entire house there for less than their rental in the city. She gave up a downtown office to move her office home. She gave up her nanny. They gave up one car.
I saw her about six months after the move. She was a new woman. So much more relaxed and happy. And now, almost two years later they are ready to start looking for a house to buy out in that area.
I love happy endings…and happy beginnings!
June 9, 2009 at 1:18 pm
I would question whether it’s actually worth Allesha’s while to work full-time. There’s a calculator at Today’s Parent’s website that can help you figure that out. The reason I question it is because they need two vehicles for two working people, one of which they could sell if she were to be a SAHM (saving on both payments and insurance) or if she were to work in the evenings or on weekends part-time, and they wouldn’t have to pay that $800/mo in daycare. With one parent staying at home, they also probably wouldn’t need two cellphones (if they have two now). She could spend more of her time doing things that would save her money, like doing meal planning. I agree that $500/mo for three people (you’d be surprised how much a 17mo can eat, actually) is actually not that bad. I would see how the meal planning goes, and cut back on convenience foods (if she’s buying any), but that’s really not the number I would stress over.
June 9, 2009 at 2:22 pm
The one problem with selling her house is the thing called interest rate differential that banks have in your mortgage papers (instead of the 3 month interest penalty) You calculate this by the rate of your mortgage minus the new mortgage rate (3.29% for a 5 year rate for example) multiplied by the months left on your term YUP A TON OF MONEY that you have to pay to the bank as a penalty, on our small mortgage of 80,000 is is the huge sum of $3,900 So I can’t imagine on a large mortgage what the penalty would be somewhere in the $20,000++ and the bank wants this upfront and if you don’t have alot of equity where is this money going to come from? Just thought I would let people know they should ready their mortgage papers before they consider selling.
June 9, 2009 at 3:12 pm
Since it seems that most of us are on the same thought process here, I won’t go to far into detail that others have covered. Evidently Allesha needs to sit down with all of her bills and accounting information to truly map out exactly where her spending is actually happening. Then she needs to learn the difference between a NEED and a WANT, because from her numbers above she is definitely heavy on the wants.
After that, she needs to get creative in reducing her costs in utilities and groceries. $500 is a lot on food – I wonder if some of this is rolled up in time-saving but money-sucking pre-prepared foods from the grocery store. Perhaps a friend who cooks can show her some simple meals that can stretch for a couple of days – lunches and dinner with small kids.
Obviously also you do not need HDTV on all the channels, and every specialty channel there is – basic cable if you want it should do just find – and no cable at all seems to be the way to go for now though – the computer can get you by if you need the internet – but both items are actually luxuries. if you have a lot of purchased DVD’s in the house, simply pop on of those in when you feel like watching TV, or use gift opportunities to get a TV series you really like.
the cell phone bill is super high too – texting costs money!! Cancel that service – YES each company can lock this feature out – you just have to ask them to do it. and why not switch to a pay-as-you-go plan so you only use the phone for emergency purposes (no calling to find out if you have milk or not is not an emergency). the plans she has are obviously not the lowest available – my bill costs me about $48 a month – and your home phone should be somewhere about that or even cheaper now!!
Allesha obviously hasn’t investigated any of her current bills, and I wonder if she really knows what she is paying for with the numbers she’s posted. it is obviously that her family enjoys life with luxury – the problem is that they do not make enough money to support that luxury.
Another aspect that may help is looking at housing closer to the main employer. Her transportation bill for the month is really really close to a car payment a month! (WHAT?) so something obviously needs to be done here. If your car is costing you $432 just to have and another $400 in gas each month, you are living too far away from work to keep driving. Or perhaps you have life things that require an insane amount of driving? While car pooling and public transit may be an option – why not look for a place closer to where you are working to cut the gas down and make another option more feasible?
Too – why is the Life Insurance so high? $200 a month – is the policy worth 2 million?? This need to be investigated as well.
It is very apparent that Allesha and her husband have no clue where their money is really going. There is no savings except for the RESP – which is their’s until they sign it over to their child(ren) and the income is too small to be carrying a $500 visa payment every month. So they need to find ways to drastically cut their expenses, and make more money. Perhaps the Grocery bill includes the diapers for her child – she needs to start signing up for coupons on these, and finding ways to get product for free…I will post on this item later…
A gail club would definitely help her out – and keep her in check with her budget!!
June 9, 2009 at 3:17 pm
I agree that you have to factor in the penalty. But if she doesn’t see her husband because he is always working overtime, she might have to say goodbye not only to her house, but to her husband as well.
I was also wondering why Allesha was buying RRSPs… It makes little sense to me considering her situation.
June 9, 2009 at 3:40 pm
other than what has already been suggested, I would try and change the frequency of the mortgage payments. Paying bi weekly means some months you end up paying 3 payments so even changing it to twice monthly will make a difference. I would also check into refinancing perhaps you could lower your mortgage payments that way unless you are locked in. It doesnt cost anything to talk to your mortgage holder to see if there are options. Once you are back on your feet you can re-evaluate the mortgage payment frequency.
June 9, 2009 at 4:28 pm
I read all of the comments left and agree in part with most of them. It does matter where you live for housing and grocery costs. I am assuming eastern Canada because of the Rogers number used. I still think it is way too high. Here in ultra expensive Alberta, we have the full cable package and only pay $165 a month. Extravagant, maybe. We have 4 people in our house (two teenage girls) and we spend about $600 a month on groceries, including the “non-edible” items. I would also add as well as everyone else, the life insurance is way too high and I would seriously consider removing the mortgage life insurance too. The financial problems did not start when they bought their house, they are just using that as the excuse as to why they can’t manage their money effectively. Could Allesha run a dayhome from her house and make the same amount of money she does at her current job? Yes she could – especially if she is paying out $800 for one child! Then she could be at home, her husband could quit working so much overtime and they could be a happier family. People need to factor in the cost of working overtime and they don’t. They just think it’s going to give them more money and most times you only net a few extra bucks. Not worth the strain on the relationship. Who pays $100 a month for water??? Unless it is trucked in from somewhere…
My suggestions:
Cut out mortgage life insurance
Re-evaluate grocery budget and take out the wants and keep only the needs
Cook all meals at home and take lunches to work
Eat more “meat-less” meals
Use public transportation and get rid of one vehicle
Investigate opening a day home to replace one income
Figure out exactly what your monthly payments are – not just averages or approximates – you may find you have more than you think
Cut out the RESP right now and when you are back in the black, then start again.
WATCH GAIL’s SHOW religiously!!! We do, and so do our kids. We all learn something!
June 9, 2009 at 5:03 pm
I think the monthly expenses are way too high!
You need to live like a pauper when you have kids and only 1 salary. This is tough to do.
June 9, 2009 at 6:35 pm
Hi Esther,
The plan you are talking about is the RDSP and I intend to take advantage of it…it is not available yet at the bank I work at…currently we have our son’s money in mutual funds but it will be switched to the rdsp as soon as it is available…it is a good program and will benefit these kids alot…it’s about time this rolled out!:)…thanks so much for taking the time to send a reply to me though I do appreciate it very much:)
June 9, 2009 at 7:01 pm
Allesha honey (no disrespect intended, you’re just young enough to be my daughter and I’ve gone into “mom” mode), everyone has addressed ways to cut back on your expenses very well. I’d like to address other things I see here.
Gail has written wonderful blogs on wants vs needs and home ownership vs renting. Please have a look at them. We can have anything we want in life but not necessarily when we want them. Please reconsider the idea of renting JUST FOR NOW.
I quickly went on the Revenue Canada website to get a general (very general estimate) on take home pay for the gross income you gave us. You are already operatiing on an approximate shortfall of $500-$800/month as it is. (Please no comments on the actual amount of her shortfall. As I said it is very rough and I entered the income for single individuals). The main point here is that Allesha has a monthly shortfall at present.
By cutting the expenses way back and working harder to generate more money a balanced budget can be achieved but at what cost? The only savings I see noted above is an RESP. This shows us you want to put your son first and be the best mom possible by giving him a chance at a bright future. My suggestion is to take a look at renting so that both your husband and you will have the opportunity to spend some time with your son and each other. Building a strong family will make it easier to handle anything from the “outside” world. Having a dad who’s constantly working and a mom “on the verge of a nervous breakdown” helps nobody.
One of the reasons I suggest selling the house (of course after careful consideration of the numbers) is that there are a few very important categories in your budget still missing that will cripple you financially if/when they come up …
-no amount budgeted for clothing, other, auto/home repairs and yes, even entertainment – children grow, you can dress a child inexpensively but not for free, your son will want to do things with friends as he grows ex. go to birthday parties any you’ll need the money -other, haircuts, bank fees, dental services etc not covered by benefits at work? – entertainment cannot be eliminated from life, even if you go to a free festival, you may want to buy a drink or an ice cream cone -a treat ONCE IN A WHILE is necessary so you don’t FEEL broke and chuck the budget completely – you can’t eliminate the joy from your life, you and your family will suffer – YOU are worth more than a life of mere existence.
-no amount budgeted for DISABILITY insurance – as it is you have a monthly shortfall and are getting deeper and deeper into debt – even if you have this coverage from work it may not be enough – nobody needs the stress of financial worries when they are dealing with health issues – an example from my life if I may – single mom (son will turn 23 this month, very independent, can’t understand why anyone doesn’t pay their credit card bills in full every month, his reasoning is simple, no money? keep the wallet in your pocket, guess he learned something from me, many sacrifices along the way so I could spend time with him -my choice only not suggesting same for anyone else) as a result only started contributing to RRSP 6 years ago when I got my present job and bought my house, mortgage came up for renewal last summer, I took an extra $50K against my mortgage to buy a rental property (duplex) to generate my “granny” income when I retire and to have the option of cheaper housing (can sell principle residence for the equity, live in 1 apt rent out other) easier life – this was the plan and then guess what? I was diagnosed with cancer a few months ago (prognosis great) – had I not had the disability insurance, $600/month positive cash flow from the rental property, small emergency fund to offset what I’m short from my pay, I would be dealing with both the stress of my illness and finances – while my example is extreme, the what ifs in life happen, what if one of you slips at work and is off for a few weeks your stress levels will go through the roof. You need a safety net for your family – emergency fund.
By the way, I was also deep in debt a couple of years ago and then I discovered “TILL DEBT DO US PART”. I too have struggled with the jars, worked overtime and had the good fortune of Gail’s advice when I met her in Toronto a while ago. IF I CAN START FRESH you can too Alleshia.
Suggestions: sell house, by renting, many expenses will go down, no property taxes, most likely cheaper utilities, decrease in transportation cost and time on the road away from family (if you can find a home near one workplace) no money needed for repairs, luxury of having someone else do them if they’re needed — pay down debt as quickly as possible so you can get that monkey off your back, save money, increase cash flow and sleep better. A HOME can be made anywhere.
After that, guess what? You’ll have learned to live within your means, will be debt free, can start saving for a house, buy one that you can enjoy instead of being “house poor”.
ALLESHIA, IF YOU FEEL I CAN HELP IN ANY WAY, PLEASE ASK GAIL FOR MY E-MAIL.
EVERYONE ELSE: I apologize for being long winded, I get this way when I see someone hurting and has asked for help. However, the good thing about the printed word online is that you can just scroll down if you don’t want to read it.
June 9, 2009 at 9:12 pm
Just want to chime in and say that $500 is not a lot for groceries. We are 2 adults and I stick to a weekly meal plan, only pack lunches and we only buy whole foods (fresh produce, some grains and lean meats). We drink coffee from home. Food in BC is expensive. I actually plan my meals according to flyers and what is on hand and we are at $450/month… and that takes A LOT of diligent work on my part. I know that if I was sloppy with it that we could EASILY spend $700/month without blinking an eye or even eating out.
I just wanted to point it out as so many people jumped on the grocery bill so quickly, and based on the fact that TDDUP airs in Ontario I do find the grocery expenses very presumptuous. There is just no way we could live on less than $125/week and still meet our basic nutritional requirements.
I have no other advice other than what was said.
Get rid of Rogers almost altogether. There is no need for cable or cell. I have never owned a cell in my life- yes, it is possible. If you have internet, you don’t really need TV. Almost everything can be watched online or downloaded for free.
The daycare vs. job situation is what really has me. Depending on why your vehicle costs are so high (for example, if you’re spending that much on gas because you live so far from work/daycare) it could make much more sense financially and for your family’s overall happiness if one parent stopped working until your child is of school age. Try to keep your foot in the employment sector in some way, so that transitioning back won’t be too difficult, but for now, that is $1800/month that could really be worked on.
June 9, 2009 at 9:25 pm
And just to give some of you an idea on basic grocery costs here… in case this seems too high. Here was my last grocery bill:
apples (5) 3.15
yellow potatoes (2 meals worth) 3.36
bananas 1.00
onions 1.22
cucumber 1.00
avocado 3.00
2 red peppers 2.48
6 cobs of corn 2.76
cantaloupe 1.50
mushrooms 3.48 (1 lb bulk)
cheese (907g) 9.98
1 can of tuna 1.77
PC salad dressing 2.59
Wheat thin crackers 2.69
2 cans refried beans 5.38 (meatless alternative)
BBQ sauce 2.49
steaks 16.44 (company coming, so this was a splurge)
milk 2.49
sour cream 1.58
sausage meat 4.49
ground beef 4.29 (1 lb)
chicken breasts (bone-in, skin on to save money) 14.68
2 loaves of bread- 4.99
ham for packed lunches – 6.12
1 dozen eggs 4.19
Total: 107.12
See anywhere I could have trimmed? Please share if you do! This is to cover two adults (mind you, one of us is 6′7 and 230). I would love to hear your suggestions!
June 9, 2009 at 10:48 pm
In Ottawa groceries are really expensive too. We never go under $700 and usually we are up near $900. We rarely ever buy prepackaged meals, and are a family of four. 2.49 for milk!!??? Here is it’s usually $4.99 at the local supermarket.
Rogers!!?? that is a crazy amount of money to give them. Basic cable and hispeed internet comes to $90 which I still think is too expensive.
June 9, 2009 at 11:11 pm
2.49 is for 2L, 4.99 for 4L is standard here as well
June 10, 2009 at 9:10 am
I say chop the rogers down. I suspect it’s a bundle deal with phone, internet and cable, and maybe cellphone. Cellphones should be for the most part an emergency item. I have a pay as you go, cost me $25 every 2 months. If you can’t live without the rogers, call they and tell them you are cancelling it all and see what they say. Get a better deal. As for utilities. To keep expenses as fixed as possible, I say go equal billing on any expense you can: hydro, natural gas. Your life insurance premiums seem pretty high as well. Not saying that’s a bad thing. But i have a premium for 100k+ category and I pay $15/month, I am over 35 and a non-smoker.
June 10, 2009 at 12:01 pm
You don’t say where you live so I can’t comment on housing or food costs. If you lived in the same city as I do they are pretty reasonable.
If you ARE living in an expensive area of the country then you have to question EVERY expense. Phone up everyone you owe money to and tell them that you can’t afford them and see what they can do for you.
I know it seems humiliating and scary, but they can’t see you.
Look for things in your area that can reduce costs like community kitchens, Good Food box program, food co-ops, farmer’s markets. Make friends with your neighbours and garden club members… Some of them have gardens and really want to share with you!
Look for other people in similar circumstances and help each other out. You can clothe a baby for free, but you need a group of people to trade clothes with.
Sometimes life just sucks for a couple years, but if you hang in there it will get better. My minimum payments were $350 on two credit cards a year ago. Today one is paid off and the other should be paid off this fall. Call and ask them to reduce your interest, though, because it makes it go faster.
June 10, 2009 at 12:28 pm
Erin – my tip for milk is that Shoppers sells it for $3.99. Much cheaper than the $5 something our local grocery store charges for it (it’s also closer than busing to the nearest No Frills, for $3.97).
Marcie – with meat, I only buy it if it’s on sale, and I also buy the bulk packages and separate and place things in the freezer. The meat we eat depends on what’s on sale that week, or what we have stored in the freezer, but I do live in Ontario, so it’s possible we get better sales for meat, eggs, etc. However, if you’re buying from a Loblaws, rather than a No Frills (you mentioned PC dressing), Loblaws is a more expensive store, so I don’t know if that’s part of it.
June 10, 2009 at 2:32 pm
I usually buy meat,eggs, yogurt and milk at the same place here in Vancouver, usually Save-on Foods/Price Smart Foods. For all the veggies and fruit, I get from a place called Kin’s Farm Market and I can get a lot for $20. I don’t often buy a lot of groceries at places like Safeway/Loblaws/Superstore because the produce isn’t as fresh and it usually costs a lot more. If you can find alternative places to shop for groceries that won’t take a lot of extra driving time, I would consider doing that rather then sticking to only one place. And sometimes, Asian supermarkets like T&T sell good meat too – usually chicken and pork is good and doesn’t cost as much as the other stores. For 2 people, we usually spend around $300-$400 a month on groceries and that is more than enough for us. Also, Costco usually has good meat and you can freeze it for later! Happy Grocery shopping! =)
June 11, 2009 at 10:03 pm
Hi Allesha,
You’ve gotten lots of great advice here – but I feel like adding my two cents’ worth, so I will
Please consider my advice in the spirit it’s given – it’s ultimatey your life and only you can make the right decisions for you, but I am and I know everyone else here is simply offering you their own perspectives in the hopes that they will help your own thinking along.
First of all though, I’m sending you good vibes! You’re in a tough spot, and good for you for doing a bit of bumber crunching and asking for help!
A few thoughts:
First, I would have found it useful if you had given your household take-home pay – i.e. how much you and your hubby actually get in your bank accounts. However, I suspect you’re already quite simply spending more than you make each month.
As Gail points out, if the budget isn’t balancing, your choices are to make more money or to cut your expenses – there are no other options that are sustainable in the long term – I wish it weren’ true
Working more might not be an option for you guys – I get the feeling your health and happiness might suffer (and are being strained a it is – family time and relaxation time are so very important!). If that’s not true, then do consider that part time job – perhaps your husband could switch off with you watching the baby whie you work, or do you have friends, relatives or beighbours who coud help? If as I suspect working more would take a serious toll on you, your only other option is to cut your expenses. I woudl suggest that you try to see what you can cut down from the smaller items first and see if that helps your budget balance. If not, you may have to look at the bigger ticket items. Either way, I am proud of you for defining the problem – that’s the first step to solving it!
Small expenses:
Your car payment of $432 seems large to me. Is that for one or two cars? If two, could you get by with one? If one, could you manage with a cheaper car? Do you even need a car – might transit work, with the odd taxi and maybe a little help from friends with cars now and then? How about a car sharing service like Vrtucar or Zipcar?
Car insurance: $250 – again, seems like a lot. If you’re keeping your car (s), can you shop around for a better rate from another insurer?
Rogers: $300 is a lot to be giving to these guys! I assume that’s phone, cable, internet and cell bundled together. If you have a home phone, do you need a cell? If you both have cells, do you need a home phone? Are your cell plans full of features you never use or don’t really need? Do you really need HDTV, or full cable, or cable at all? I’ll tell you my own bis on that one – I don’t watch tv at all and so haven’t paid for cable for years. My partner likes having basic cable, so he pays for it out of his own money
Also, I see no reason to have both a cell and a home phone, so I just have my cell – however, we don’t have kids – might be a factor. Internet I personally consider a necessity – but do you need it? If so, could you drop to a slower service or a different service provider?
Gas: $400 a month- again, this is lots in my view! Maybe one or both of you have to commute a long distance, but it sure does add up. Could you find work closer to home? Could you switch your car for a more fuel-efficient one? Could you take transit?
Grocer: $500 – I actually think this is reasonable, depending on where you’re living. My partner and I are committed to eating well, including organic free-range meat (when we eat meat), fresh produce in season and out of season, which is the expensive bit), and good quality ingredients overall – and so we budget $600/month for groceries, which includes non-edibles and organic food and eco-friendly supplies for two very spoiled cats. Feeding a family of three well on $500 is pretty darn good in my eyes – and I do think it’s important to eat well.
RESP: $100 – I think it’s great that you’re doing this for your kid – if you can manage it, I’d keep doing this, but not at the expense of going into debt every month! Either you kep contributing to this and cut deeper elsewhere, or you stop doing it and begin again when you can afford it better.
Credit cards: $500 – Like everyone else, I hope you’re paying more than the minimum and not continuing to use them – otherwise you’re digging yourself into a very deep hole! I would actually increase this if you could to pay it off quicker – but not at the expense of a life. If it’s th difference between a balanced budget or not, you could pay a bit less, assuming you’re paying more than the minimum (always pay at least the minimum payment!). It’s a last resort (and will affect you credit rating!), but keep in mind that you can talk to a non-profit credit counsellor about doing a consumer proposal if you’re finding you really can’t pay this off. I’m not an expert and I’m not advising you to do this, but it’s an option – if you go this route, be sure to ask lots of questions about how it would affect your credit rating and especially your mortgage/ability to refinance it. And again, if you’re still using them, stop!!!
Life insurance $200 – seriously? This one seems really high to me. I’m your hubby’s age and I have life insurance worth about $75K so that if I croak my student loans are paid off and there’s a bit of money in my estate. It costs about $8/month. I don’t know what your insurance needs are, but I think you may want to take a good hard look at them and make sure you’re not overinsured. If one or both of you dies, you want to be sure that your loved ones are going to be OK – so how much money will that take? Take out term insurance for that amount and no more – becaue chances are both of you will live long, happy lives
Note I say term – I personally don’t like the fancier kinds of insurance that pretend to be investments too. Insurance is a service – pay the cheaper rates of term and when you have spare cash invest it elsewhere.
Hydro $130, and electricity and water every 3 months $300 – something weird here – electricity and hydro are in my experience the same thing, and $130 for hydro is kinda high. Water shouldn’t cost $100 a month. You might want to look at these again.
I hope that some of the above suggestions help you balance your budget – but in case not, let’s look at the biggies: Mortgage of roughly $1700 a month, and daycare of $800 a month. Depending on where you’re living, that might nto be unreasonable for housing – however, it’s a huge chunk of your household income and like others here I think you might want to think seriously about downsizing or selling and renting for a bit, until you can afford to buy something you like. Selling and renting has the advantage of likely leaing you a bit of cash you can pay down debt or invest with. Gail did an excellent article recently on why people may not want to own a house – cashflow is an excellent reason to rent, not to mention peace of mind. Downsizing can help as well, but be sure you’re not taking on a cheaper place that may cost more to maintain, or that wil add to your commuting costs. Be sure also that you can live comfortably there – you don’t have to love it, but you do need it not to drive you nuts.
Finally daycare – $800 in some provinces is actually pretty good – I’m guessing you don’t live in la belle province, where the residents are cursed with high taxes and language politics, but blessed with $7 a day daycare (if you can get in
Some here have suggested staying home to take care of your kid – you’d forego your income, but would save on daycare, as well as commuting, work clothes, work lunches, and various other things. It’s a very personal decision – personally, I have no kids, want none and like having a career outside the home, but I know women and men who resent having to work and want nothing more than to hang out with the kids full time. If you’re seriously considering it you’ll have to do the math to see if it makes sense for your situation – and remember to consider the effect on your happiness as well!
Allesha, I hope some of these thoughts are useful to you in figuring out what to do. I have enjoyed writing them down – thanks for offering your situation up as a case study – I salute your bravery and wish you all the very best!
June 11, 2009 at 11:43 pm
Aleesha,
Only my thoughts on what I would do.
Keep your insurances. I know it seems like a lot of money, but stuff happens and when you have children, you have to think about their welfare, but prioritize insurances:
1. Life (non company, so it doesn’t go kaput if you lose your job)
2. Disability
3. Mortgage
Daycare $800 – can’t help this until your child goes to school unless you have relatives who are willing to help with babysitting.
Car payment $432.00 + Car insurance $250.00 +Gas$ 400.00
Give up the new car. Not the time in your early lives to have so much at once (new car, new house, baby, etc.)
Keep one car and try carpooling with someone at work or take transit.
Rogers $300.00 – go basic for cable, phone, internet. If you need cell’s, use pay as you go and limit cell use to emergencies only. This should save you almost $150/m.
Grocery $500.00 – 2 adults and one small child should be around $300/m. Go through the weekly flyers to see where the “specials” are to save. Limit going out to once or twice a month.
RESP $100.00 – Government gives “free” money when you contribute so keep this for your child.
Credit Cards $500.00 – If this isn’t debt payments and is “stuff” you’re buying. Only buy the necessities if you can. Limit “wants” to $100/m
Life Insurance $200.00 – Keep
Hydro $130.00 – Keep
Electricity & Water every 3 months $300.00 – Keep
Only work part time if its income is much higher than the additional expense you would have in daycare. But keep at least one weekend day or couple nights free for you to keep sane.
If you’re ready for drastic measures, you could also
1.If you commute a lot, consider selling home and moving closer to work and downsizing home so household costs don’t exceed 35% of net income. You would have to calculate, though, whether, the savings from mortgage and gas costs would offset realtor commission and likely loss in equity (as you might have bought in peak 2008 season).
2. OR renting a room or basement in your home to young professionals or newgrads. Don’t do this, though, if you need to renovate a lot as renovations can be expensive. Be sure, though, to get proper references and work with your social network for possible “roomies”.
3 Start looking for a better paying position to help pay things off.
Hope this helps,
June 12, 2009 at 8:58 am
As with most of the posters above, I agree with most of the items, but I have a couple of things to add. It really makes a difference where a person lives to suggest some of the changes that people are making. We live in Northern Ontario, and have to drive to work. So, gas costs are higher for us. When Southern Ontario prices are 90 cents a litre, we are paying closer to $1.00 or more. Alternate transportation is not an issue – we have to have cars as we don’t live in a city where busing is an option. We can’t walk or bike the 30 km one way drive either. Move closer to work? Then taxes, house prices, and other costs go up. My husbands work is stable and the income is very good. Which affords me the ability to stay home with our girls. Our grocery bill is higher than some of you are suggesting as well. Again, prices are higher here, and if you want to eat non-processed foods, you pay for them. We got rid of our satellite TV, have a basic land line phone, and our cell phone is a basic plan – which sometimes doesn’t even get reception here. So, when trying to figure out a person’s ability to cut costs, it may help to know where they live. Just my two cents worth!
June 12, 2009 at 5:44 pm
I have not read all the great advice above yet, but I thought I would put my 2 cents in. I have been trying to pull together out spending, and it sounds like we have similar issues. My first big question is why does your food cost $500 a month? Try to really look at your grocery purchases and especially what you throw out. Do you buy the expensive cheese? Do you buy a big box of fruit and throw half of it away? There are a lot of ways to cut your food costs, no matter where you shop. It may also be worth it if you chip in on a membership to a place like costco with family or friends. The meat is usually more fresh, and you can save 5-20+ a month (not much, but it does add up).
Also… $300 Rogers? If that means phones, you really need to rethink your plan. Most companies do allow you to sway plane at least once a year. If you are using too many minutes, and paing extra, increase you monthly limit for $5, and save $50. (You can also downgrade your plans). With the new “pay for every text” be careful. maybe try to just turn the text feature off and see if you can handle it. A good option would be a family/small business plan. It usually lets you cann for free between you and your spouse and gives a certain number of calls to other phone numbers.
I know this one sounds crazy but maybe try it for a few months:
My friends sister lives with her boyfriend and his 2 year old girl. They don’t have a TV. They play games and do outdoor activities instead. It would save on any cable costs you pay now, and a bit on the electrical bill. Give it a try. Even if it is only for the summer months, it might work out well.
June 17, 2009 at 12:51 pm
Marcie in Vancouver: Food prices are even higher in Victoria. I think we overspend at $500 for two adults and could cut high intake of cheese, splurge on steaks and even on prime rib sale at Superstore. The best advice on cutting these costs I found in 1990s from The Tightwad Gazette by Amy Dacyczyn (still at library) which included buying at the best sale price large bags of potatoes and fruit, using powdered milk, buying large bags of meat and freezing in small portions, etc etc; making your own bread, crackers, salad dressings, sauces, cooking and freezing lentils/beans and then cooking from your well-stocked pantry … as people did a generation (or two?) ago. I’m just as happy as a guest to have a burger as a steak.
June 17, 2009 at 2:32 pm
Allesha: Obviously, everyone likes to share advice (we all learned by experimenting and sometimes making big mistakes). The main thing seems to be getting good value (for you, what you want) for every dollar spent and trying to find a better or cheaper way to do that. The book “Your Money or Your Life” by J. Dominguez and Vicki Robin has you find out what your time is worth: If you had another job, what would the actual money per hour be after taxes and all other expenses? You could probably ‘make’ more money by studying all your expenses and seeing what you really need and what you can cut down on.
I found asking competitors (banks, insurance companies, etc) very helpful in getting information — they want your business and are glad to tell you a better way. One bank told me what to ask for to save $10,000 on what the first bank was screwing us around for.
Good luck. Wish these blogs had been around for help year ago!