Now that we have broken down the 44%, and you are saving money in your RRSP or somewhere else we can discuss the spending break down. Living and Luxury spending need to have their place in your budget. What we are trying to accomplish with this blog series is to help people turn their thoughts to owning the process to becoming a homeowner, part of that ownership is dissecting what we are spending. Sounds riveting!! In the last blog, we unpacked what living in 44% of your income looks like. To recap…..Two adults earning minimum wage at full-time jobs would have $2135 to spend on debts, with $1830/ month left over to manage living expenses. Here we are going to further break it down to what should be included in your monthly budget. Creating columns for yourself, one is 44% and the other is Not 44%, here we go.
The first column is your 44%, two people with $2135/ month have to spend to get or keep your credit in good standing & pay your housing. This list are things that are probably always going to be there and what mortgage agents will look at when deciding how much of a mortgage you can carry. Decreasing anything you can in this area will go a long way to getting you in a home. What would be in your 44% column?
- Your rent/mortgage
- credit payments
- loan payments
- car payments
- cell phone
Paying your debts on time will keep your credit in good standing, something you will need for loans like a mortgage (we will go further into what is credit in another blog…. stick with us) and you have to keep a roof over your head. If you are paying rent or a mortgage that is more than 44% of your income, it is a good idea to reconsider and look at other opportunities.
The second column is for the rest of that income, the $1830/ month. The tricky Living vs Luxury debate. This day in age internet has become a necessity, now with streaming online, we have a whole generation of people that don’t consider cable a necessity. This area gets case by case, take a hard look at your lifestyle and decide what is a must vs “I can do without for now” here is an example of a list…
- pet expenses
Again, this is a very personal list. A house with teen boys’ vs single person, costs will have different priorities. Do you go to spa treatments? Are they for medical reasons? How often do you eat meals out? With tap & smartphone payments, impulse buying has become hard to resist, but with online banking and banking apps, reviewing your spending has never been easier. Take some time to print your bank statements, and see where exactly your money is going each month, could some of it be better spent to reach your goal. Other incomes that have not been touched on, Child Tax Credit, HST rebates, and any other cash windfalls (tax returns, performance bonuses etc.)…. ALL FREE MONEY!!!
Doing this exercise, you will be taking a critical view of your spending habits. It is up to you if you are going to own it. You can either make tomorrow day one or hope it happens one day.
In the next blog, we will be teaching you how to own your credit score, and that this elusive unicorn number is yours to control.