How Much Does It Cost You to Survive?
Posted by Christi | Filed under Christi
Have you ever looked at what it costs you to survive? I’m talking your very basic living expenses. When we try to create a balanced budget or plan to repay our debt, we often look at reducing variable expenses like eating out and entertainment before considering our survival costs. We struggle, we fight, and we often blame our partner when the plan doesn’t work, but do we really know why the plan isn’t working? For many people, it’s because it is costing them too much simply to survive.
Survival costs consist of three budget categories; housing, food, and transportation. We need housing to keep a roof over our heads, we need food to stay alive, and we need transportation to get to and from our jobs so we can keep earning an income. An incredibly caring colleague of mine, Fernanda Capela, taught me this exercise, which I’ve coined “The Survival Method”. Now I will teach you. Here are some general budgeting guidelines for each of these budget categories:
What are Survival Costs?
- Housing should be no more than 40% of your net income each month. In fact, Gail recommends no more than 35%. Housing includes not only your mortgage or rent payment, but also your property taxes, condo/strata fee, home/content insurance, electricity, gas, and water bills, as well as phone, cell phone, cable, internet, and home alarm bills. Basically, everything that you need to keep your house up and running.
- Food should generally not exceed 10-20% of your monthly net income. However, this will depend on your situation. Statistics Canada states that the average adult eats on average $200-250 of food per month. Some 12 year olds eat like adults, and some adults eat like birds, so this will vary from household to household. Food, when looking at survival, consists of everything you need to keep your body running. This will include all personal care items and baby needs. I would suggest lumping medication into this category as well.
- Transportation should not exceed 15-20% of your monthly net income. Transportation will get your kids to and from school as well as transport you to and from work to earn an income. Transportation includes vehicle payments, insurance, maintenance, as well as parking costs, bus, and taxi fares.
*Remember that this guideline is just that. Based on your income and family circumstances, your allocations may be very different.
How to Calculate your Survival Costs
- Housing: Total amount / monthly net income = % of income (move the decimal 2 places to the right)
- Food: Total amount / monthly net income = % of income
- Transportation: Total amount / monthly net income = % of income
Add up the three percentages to find out what portion of your monthly income is going to survival. Doing this may be the key to your financial freedom. I often work through this exercise with people and the outcome is sometimes reassuring, but other times quite alarming. Some people realize that their transportation costs more than their housing. Others realize that their housing, food, and transportation eats up 95% of their income. This is such a simple calculation. We all should do it.
What Does This Mean?
In the most basic form, we need housing, food, and transportation to stay alive. But here is where we get to differentiate “needs” from “wants”. If we cannot fit all of our expenses, savings, and debt repayment into 100% of our income, then we must do one of two things; increase income, or decrease expenses.
If you choose to decrease your expenses, look at the category that sticks out the most. Should you trade in your vehicle for a less costly option? Do you need two vehicles or could you try being a one car family? If there is absolutely no way to decrease your transportation costs, or if your transportation costs or reasonable, perhaps you want to focus on your housing costs. Are all utilities as low as they can be? Can you reduce channel packages or downgrade your internet speed? Can you as a family work to reduce the use of water and electricity? Or, (you knew it was coming), do you simply need to downsize your home?
Calculating your survival costs will take you 5-10 minutes, and could be the answer you’ve been looking for. Why struggle to spend less on eating out or clothing when that’s not really the problem? This exercise will immediately show you if one area is completely out of whack and tell you where to focus your efforts and attention. It will prevent you from wasting your time, and help you get right to the root of the problem.
Do you dare post below what percentage of your income is being used to cover housing, food, and transportation? Keep in mind that your comment can be anonymous, and you’re not sharing any income or expense costs – simply percentages. Let’s help each other understand where we are. I’ll go first:
- Housing: 38%
- Food: 10%
- Transportation: 27%
Yep, 75% of our income is going to survival alone. However, because we don’t have debt payments, leaving 25% of our income for “everything else” is working. So how much does it cost you to survive?
-ChristiPosner (@ChristiPosner)
Christi Posner is a Credit Counsellor for the Credit Counselling Society, a non-profit, charitable organization. Born and raised in Winnipeg, Christi is a newlywed, a new homeowner, and with the exception of car loans and a mortgage, she is newly debt-free. Her goal is not merely to survive, but to financially thrive; and to do so with some passion, empathy, humour, and a smile.
September 22, 2012 at 9:40 am
OK I’ll share:
Net income is $9400 between me and DH, not including any overtime.
Housing is $4165 per month but we pay an extra $2000 on our mortgage to pay it off ultra fast. Transportation is $970, and Food is $800.
So percentages are House: 44%, Car: 10.3% and Food: 8.5 %
I was kinda shocked when I added it up cause it only comes to about 63%, but then I remember we have savings, RESP’s, and other things that are probably essential but not included in those percentages, like Daycare costs and diapers. I guess we’re technically way over on Housing costs, but if we only paid what we have to on the mortgage, then it would only come in at 23%. And we consider the extra payments like “savings”, although, we do traditional savings as well.
September 22, 2012 at 10:26 pm
Nice work on the mortgage!!! You’re doing a fine job. Thanks for starting the conversation!
September 23, 2012 at 12:03 pm
Yes, we are really excited to get rid of the mortgage so fast (about 4.5 years from now, and I’ll be only 32). Sometimes we wish we could buy more, or do more, but it’s all just stuff, and when we think of how freeing it will be in just a few short years, we feel pretty good!
September 22, 2012 at 10:18 am
We live in the U.S. Our housing is 29%, Transportation: 15%, and Food: 9% = 53%
September 22, 2012 at 10:27 pm
Fantastic!! Great job. Thanks for sharing, neighbour! (Yes, that’s with a “u”)
September 22, 2012 at 10:57 am
Interesting: we’re currently required to pay 18.1% for housing (but actually pay 70.2% as we’re getting out of the mortgage within 4 years or so), 8.5% for transport (and this will drop to 3.2% once we don’t have the car payment), and 8.2% for food. I’m practicing living on what disposable income I will have for retirement so it’s not a shock and we’re using all the other cash for savings or to reduce our living costs (i.e., no mortgage).
September 22, 2012 at 10:29 pm
WOW, you’re almost at the end of your mortgage, congrats! So you’ve probably realized that 87% of your income is going to survival as of today. That leaves 13% of your income for everything else. Is it working? Are you using 100% of your income or maybe a bit more? Great job test-driving your retirement, you are a smart, smart person.
September 22, 2012 at 11:00 am
Oops, forgot utilities above: housing required costs actually 21.8% and accelerated paydown ratio is therefore 73.9%
September 22, 2012 at 10:31 pm
Oooh, that bumps up your survival costs to 90.6% of your income going towards housing, food, and transportation. That leaves 9.4% of your income (what is the dollar amount of this) for EVERYTHING else. Does it work? That’s really tight, but doable if you work hard!
September 22, 2012 at 10:59 pm
It works cause the retired hubby occasionally picks up well-paying contracts, socks the cash away and supplements the monthly income with $750 per month for mortgage paydown (included in net income calculation). My ‘free’ money is about $600 per month which includes charitable donations, clothing, etc. And you reminded me I neglected to include hubby’s spending supplement from his savings (til he gets to CPP next year). And if we have an unexpected expense or a planned one that we decide to move up in time, we forgo the temporary extra $1500 per month (we actually pay about $3100 extra per month on the mortgage). So we’re in the happy position of having savings to supplement income as required. And yes, that does mean we spend more than I included in the monthly revenue…
September 22, 2012 at 11:56 am
Hello
Our percentages are as follows. They also decreased recently as my boyfriend started a new job with a large jump in pay.
Housing is 15% which is ridicuously cheap for where we live (Vancouver). We rent from a coworker and we get a good deal. This amount includes the cell phone bill.
Transportation was not as bad as I thought with 2 car payments, gas, maintenance and my monthly bus pass. At 17%
Food which includes the cat food and supplies comes in under 10%
Our current debt payment is over 30% since we are tripling our debt payments to have it gone as soon as possible.
This still allows us to have money to spare for fun and recreational activities and hobbies.
September 22, 2012 at 10:33 pm
15% for Vancouver?! JACKPOT!!! Sounds like you’ve got a great balance and a fantastic debt repayment plan. Good for you!
September 22, 2012 at 4:18 pm
Our breakdown is housing is 33%, food 4%, transportation 9% for a total of 46% which is great because travel is about 7% and we make extra payments towards our mortgage. If there was a change in one of our income, luckily we can make our payments for our survival.
September 22, 2012 at 10:34 pm
You’re a superstar!! Way to go!
September 22, 2012 at 4:54 pm
I did the percentages as outlined in each category.
Housing – 32%
Transportation – 7% ( I save up for each new car so never do monthly payments)
Food and Health care – 13%
I’m not sure that the term survival is appropriate for such things as cable, cell phone,and internet, as many people can survive well without them. These are things people want. I spend about 10% a month on fitness, but I know this is a want and not needed for survival as you don’t need to spend a lot to stay fit.
September 22, 2012 at 10:36 pm
Hi Rae,
You’re doing a fantastic job. And you’re right. Cable, cell phones and internet are not required for “survival”. If you want to separate the two, housing should be no more than 35% and utilities should be no more than 5%. That’s how I got to the 40%. If people are finding they are above the 40%, then phone, cable, and internet are places they can absolutely look to cut back. Thanks for the comment!
September 22, 2012 at 6:30 pm
Ours is approximate as my husband’s income can vary. I have used income numbers from an average month.
Housing – 26%
Transportation – 17%
Food – 10%
That puts us at a little over 50%…not bad.
September 22, 2012 at 10:36 pm
Hello fellow Christy! Not bad at all!
September 22, 2012 at 6:35 pm
Here is mine:
Housing: 30%
Transportation: 41.4%
Food and Health: 4%
My foo is so low because I live with my parents and my rent covers my food and utilities. It is scary to know that my transportation is costing me 41% of my income. So I am trying really hard to reduce that by trading down my vehicle.
September 22, 2012 at 10:38 pm
Hi Sarah. Thanks for your honesty. I, and others, truly appreciate it. I agree that transportation is quite high, but it sounds like you came to that conclusion on your own a while ago! Check the term of your loan/lease, and definitely speak to some dealerships and the financial institution that the loan is held. Good luck!
September 22, 2012 at 10:24 pm
Wow! My housing costs are only 16%, without factoring in cost of maintenance and repairs. There is definitely work that needs to be done. Food was 17%, but the biggest eater has gone to university, so that will drop. Transportation is about 10% with insurance. We are aggressively paying off debt, so that consumes 30%. That leaves 27%. Of that 23% goes to savings (RRSP, RESP, EF),which leaves 4% for everything else, which I guess is the reason I feel like money is so tight. I do work some overtime to make things balance, which I kind of averaged in, but maybe I underestimated a little. I’m going to crunch the numbers again. I was keeping an exact account of all spending for quite awhile, but stopped when income and expenses balanced. Now I’m curious to see exactly how it all looks on paper again. I am reluctant to decrease savings as we seem to be able to make it work right now. Not sure how though when I look at the numbers…
September 22, 2012 at 10:42 pm
I love that you went through the whole exercise! Did you calculate what 4% of your income is, that is supposed to be for “everything else” in a month? It is realistic? If something needed to change, your housing costs are fantastic, your transportation is as well, and the food is on the higher end, but as you said, that’s about to decrease. Sometimes, if you don’t want to cut back on things like savings, that’s okay if you’re willing to work more. It sounds like you’ll do just that. Thanks for your participation!
September 23, 2012 at 3:13 pm
My take home amount is $2182 – I’m calculating using my numbers only, not doing mine and my husbands – we haven’t yet changed how we were handling things from before the wedding.
Housing: 36% (rental apartment – if necessary, we could move and reduce costs)
Joint expense (food, cable, phone, internet): 16%
Transportation (metropass & some gas money): 7%
my totals are 59% of my take home pay.
If we were to do both, the numbers will change: $4,982 take home
Housing: 32%
Joint expense: 14%
Transit (including insurance, car payment, metropass, gas – though the car isn’t currently used by either of us to get to work): 12%
total: 58%, though if we were using the car more (instead of just for errands, appointments, and weekend travelling), gas would be more than $80/month.
My husband and I both spend extra on food for socializing and sometimes lunches at work, but those amountsare from personal spending rather than joint expense.
September 24, 2012 at 7:56 am
Take home income = $4000/month
House = $1300/month (mortgage, taxes, heat, hydro, water, insurance, cable, internet) = 32.5%
Car = $285/month (only insurance and gas, didn’t count mtce) = 7%
Food = $300/month = 7.5%
September 24, 2012 at 8:48 am
House = 31%
transportation = 21%
Food = 8%
Both the house and the car include maintenance, and that includes the increased mortgage payments.
Hopefully the transportation will go down to below 15% next spring. We’re going to try living with just one car when the lease on the second is up. Even if we just last the spring & summer, that will really help to fatten up the vacation fund!
September 24, 2012 at 2:54 pm
not exactly sure of the percentages as I’m not near my spreadsheet at the moment but I know we’re around (if not just below) 35% for housing and our transport is close to that as well since I lump our recreational vehicle in that category, as a rule. It leaves about 12% on our food….which we need with a house of males plus me.
Lots of homemade stuff to try and stretch out the food for a month.
September 25, 2012 at 10:28 am
Housing 41% (with current levels of cable, internet etc whic could all be cut back if needed)
Transportation 6%
Food & PC 12%
In the spirit of ‘survival’, I calculated on the basis of take home pay & didn’t include child support.
September 26, 2012 at 1:03 am
Just did the calculations to compare mat leave vs working.
Working:
Housing-42
Transportation-8
Food-13
Savings-15
Debt-0
Total-78
Mat Leave:
Housing-56
Transportation-8
Food-16
Savings-11
Debt-0
Total-91
Housing is high, but if we stay in this house and continue these payments, we will be mortgage free before age 35
Transportation costs are likely overestimated, but the percentage is approximatelythe same for work vs mat leave because the cost-savings of not commuting offsets the decreased income
Food is a bit high because it includes $200/month to feed our dogs
Savings we had decreased to about 7 while on mat leave, but recently added RESPs
The total left to spend while on mat leave is pretty low, but we have money set aside for larger baby expenses, vacations, home repairs, gifts, etc toget through this year. We also eat out much less than we used to and I’m not getting my hair dyed every 6 weeks anymore