Thursday, October 28, 2004

My $15k budget

Many people have asked how I can live now with $15k.

To simplify things (for me), all amounts are in canadian dollars (CAD). Currently, $1USD ~ $1.23CAD. But as the cost of things in Canada is different than that of the US, doing the conversion might be irrelevant. For instance, my condo here is worth $85kCAD and could be worth over $400kUS if it was located in Manhattan but gas is almost twice the price here than in the US.

Some preliminary informations:

- I'm married. For many expenses, we share payments, that is the case for the condo mortgage, for instance. I specify when expenses are shared or not. Whenever they are, I display my share.

- I am a part-time student at the university, but Quebec has the lowest scholarship fees in North America (less than $1800 a year in most universities). I already have put aside $1000 which will cover my last session. Since it will be the last time I will ever pay for scholarship fees (hopefully, since I will then have a Ph.D), I did'nt include it in my budget.

- I own a five years old car (small sized sedan), last payment on the loan was made two months ago. I don't use my car much (I go working using public transportation and walk a lot), so car maintenance and gas costs are low.

- We have a 2 bedrooms condo valued at $85k with a mortgage of $63k on it. My wife and I both contribute to that, thus the low amount. I show the figures for my half.

- For expenses that vary one month to another, I maintain "virtual accounts". That is, I keep track of my real expenses. If my expenses are lower than my budget for a given month, the difference is kept in the account to use for future months. If my expenses are higher, I "borrow" money in the account. From time to time, I modify the budget value according to keep the balance just over the real expenses. I've been doing that for almost 10 years, thus the amounts are reasonably accurate.

- For one-time expenses related to furniture acquisitions, I have estimated how much money we need to invest each year in order to keep furniture (tv, computer, sofa, appliances, etc.) at their current value. I will no show the details of this estimation, since it is fairly complicated. For instance, a computer loses its value fairly fast and will need to be replaced more often than our micro-wave oven. Some items keep most of their value after an initial loss (ex. a guitar). Some items can be completely worthless after a period of time (ex. my digital camera will have no value in 10 years) while other keep some value almost forever (ex. books)

- Health care is provided by the province universal health insurance, which is free and paid by the government. In counterpart, we pay much more income taxes than in the US.

- Life insurance, travel insurance, invalidity insurance, medication insurance are paid by my employer

All expenses are monthly figures.

Car-related expenses (partly shared)
- I put aside $100 (shared, my wife also puts aside $100) to pay for repairs and to grow a down payment for our next car. We plan to keep our car for two more years. The car value should be over $3500 at that time and we should have put aside in this account about $2500 (hopefully, repairs should be much lower than the $5500 the budget sums to in two years). Thus, when it will be the time to buy our next car, we should be able to pay down $6000 and keep our mothly loan payment to about $200 (thus, my half would be ~$100). Account currently contains $400.
- car insurance: $40
- public transportation: $45 (discount fee as a student)
- gas: $25 (shared)
- car maintenance: $30 (shared) (which I cumulate in a special virtual account; there is currently $650 in this account). Includes normal maintenance (oil and filter, check-up) and other car-related expenses such as driver licence.

Condo (shared)
- Mortgage: $190 (includes life insurance)
- Taxes: $80
- Insurances (furnitures): $13
- Condo fees: $68 (includes insurance, heat and warm water)
- Electricy: $15 (electricity is cheap in Quebec, does'nt include heat and water, see above)

Other expenses.
- Phone, Internet: $30 (shared)
- Grocery: $200 (shared)
- Provision for contingencies: $50 (not shared) (as of today, I have cumulated $6000)
- Summer vacations: $50 (shared)
- Furniture acquisition/replacement: $60 (shared)
- Charities: $20 (I volunteer two hours a week)
- Other expenses $300. Includes everything else, from clothes to gifts, wine, books, cds, restaurant, theater, newspaper, etc. Some of the expenses are shared with my wife, some other aren't. That allows $3600 a year.

The "Other expenses" is difficult to break down, since it varies much as time goes. Approximately:

  • Gifts: $500/year (my wife and I have decided a few years ago that we would not give gifts to each other for Christmas since we believe this holiday has become too mercantile). We often buy each other subscriptions to theatre or music lessons, for instance, for our birthdays. Thus, the values below will sometimes be lower.
  • CDs and books: $100/year (we already have >400 music albums at home and >1000 books in our bookshelves, so we have decided a few years ago to limit acquisitions)
  • Movie rental: $100/year
  • Theater: $100/year
  • Restaurant, bar: $1000/year
  • Lessons: $200/year
  • Clothes: $400/year (I have few clothes. That way, I throw them away when they become too used, not when they are out-of-date)
  • Newspaper, magazine: $200/year
  • Wine, alcohol: $700/year
  • Others: $300

Total = $14,952 a year.

To insure that I have not underestimated my budget, I've calculated how much money I had a year ago and how much money I have today, from which I removed interests gained on bank accounts, return on investments and other gains. Then, I compared the result with my disposable income. It turned out that my expenses where last year a bit lower than my budget. I probably had spent a bit less than the $300 in the "Other expenses" category.

So now, your turn. Doing your budget, you'll know where your money goes, where you can save and how much money you'll need to retire. What are your yearly expenses?
Later, I will post my after-retirement budget.

22 Comments:

Blogger Viajera said...

Hi again! My budget has come to about $15,000 for the last two years as well. The allocation of my money is about 50% savings and investments and 50% expenses. From what I've read, the American savings rate is only about 1% to 2% of their total income. Sad.

This year my budget is a little blown from travel expenses. But I went to Monterey twice, the Bahamas, Florida, Vancouver, Canada, New England and NYC, and this Christmas to Yosemite. All that traveling for about $3500. Do you and your wife travel? It's the one thing I can't live without.

9:06 AM  
Blogger Jack said...

Hello Viajera!

My saving rate is approximately the same that yours, maybe a little bit more, it is difficult to assess exactly, since part of the savings are in IRA/RRSP, so you save tax and it is difficult then to know your real disposable income.

By $15k budget asn't many room for traveling, only a small $50 a month for "summer vacations". I actually love traveling, but I haven't traveled much lately. I travel from time to time for my job, mainly in the US and Canada. I'd like to go to Europe some day and think I will soon (maybe this spring).

Otherwise, most of my vacations/traveling are not too far away, I like exploring my area, I'd say inside the 10 hours car drive range, which include places such as Toronto, Boston, NYC, Maine, Mass, Vermont, Quebec, New-Brunswick, Ontario...

My post-retirement budget contains à $150 a month for traveling. If my wife contribute the same, that would be $3600 a year, which I think is more than enough for our traveling habits (we don't mind lodging in a cheap hotel or even camping).

Bye!

Jack

6:16 AM  
Blogger Jack said...

Hello Viajera!

My saving rate is approximately the same that yours, maybe a little bit more, it is difficult to assess exactly, since part of the savings are in IRA/RRSP, so you save tax and it is difficult then to know your real disposable income.

By $15k budget asn't many room for traveling, only a small $50 a month for "summer vacations". I actually love traveling, but I haven't traveled much lately. I travel from time to time for my job, mainly in the US and Canada. I'd like to go to Europe some day and think I will soon (maybe this spring).

Otherwise, most of my vacations/traveling are not too far away, I like exploring my area, I'd say inside the 10 hours car drive range, which include places such as Toronto, Boston, NYC, Maine, Mass, Vermont, Quebec, New-Brunswick, Ontario...

My post-retirement budget contains à $150 a month for traveling. If my wife contribute the same, that would be $3600 a year, which I think is more than enough for our traveling habits (we don't mind lodging in a cheap hotel or even camping).

Bye!

Jack

12:21 PM  
Anonymous Anonymous said...

Hi,
I like your idea, and I give you credit for your determination. I also share your ER plan, but my planned age will be 46(1 year away). I have been focused on my plan for some 12 years now, and although the market crash of 2000 was a huge bump in the road, I am back on track.
Now,not to be negative, but I do think that you have glossed over a few very key points.
First, you live in Canada, so health care costs can be ignored. I know you have made that clear, but I don't think you realise how much that aids your plan. If you lived in the US, your budget would need to be adjusted significatly.
Secondly, you are married, but you state that your wife shares your expenses. It sound like you have a non-traditional relationship(her money and your money), that is not they way my marriage works. But more importantly... you never say she will retire. So she keeps working and contributing? In that scenario,
I can say my wife retired at 29. This way of looking at your budget allows you to be a family(husband and wife), but have the budget of single person co-habitating with another person. I don't think that counts as be financially independent. You still rely on her sharing expenses. Perhaps this would be analogous to a man moving back home with his parents, paying them rent and some money for food, yet saying he lives on 15k a year.
The last point, you have no kids. Most 37 year olds will be right in the middle of raising and supporting a family, which adds a big burden to the living expenses. A condo is no longer big enough, more for food, clothes, activities, etc.
Now...of course this is the life you choose and again, I am not being negative. I am just pointing out that your 15k budget is not at all special when you consider those 3 very important points.


BTW...as an American, I must defend our reputation. I save like a fiend, and I am certainly not alone. Don't lump all us Americans in one basket.

11:00 AM  
Blogger Jack said...

Hi Anonymous,

I agree with most of what you said about my plan. However, let me comment a little bit on some points.

You say that the fact that health care being free aids my plan, but don't forget one important thing: nothing is really free and free health care has a hidden cost: taxes. In Quebec, about everything you buy is taxed at a 16% rate, but income taxes are also much higher than that of the USA. Alcohol and gas are also overtaxed. Thus, the benefit of free health care in my plan is (at least partly) offset by the increased difficulty of saving money.

About marriage. Maybe it is a cultural difference, but where I live, most married people just do as we do: both the man and the woman are working full-time (even if they have childs) and they share expenses. You may thing this is right or wrong according to your values, I personnaly think its okay, my wife appreciates the independance she has doing that, and should I or her have financial problems in the future, we would help each other, as of today, this hasn't happened yet.

But I don't think I rely on her sharing expenses. If I was single, my condo would be smaller, groceries would be smaller, etc. Sure, we save by living together, but it is more like people co-habitating to save on the apartment rental cost. Anyway, I could have said instead of talking about my $15k budget that our household of two has a $30k budget, but my saving rate would be the same and my post-retirement needs would also be the same.

You say also that my "15k budget is not at all special when you consider those 3 very important points".

I agree and disagree at the same time. I never have said my plan was a magical recipe (or even a new recipe). I'm just taking the right steps to fulfill it. But living on a $15k budget, even in my situation (we all 3 important points you have described), requires a bit of creativity.

Most people I know would live with at least twice this budget in the same financial and personal situation.

One last comment. I don't remember having said anything against Americans on this blog, I only remember having said that the price of things may be quite different in Canada compared to the US.

10:10 AM  
Anonymous Anonymous said...

Hi Jack,
First off, you are certainly correct. You never made a comment about American's saving habits. A reader posted the comment...the saving rate is the U.S. is so low.
Certainly the average is low, but there are many Americans just as frugal as you and I. My comment was directed to that post.
And yes, my idea of a traditional household is "one budget, one checking account, and one savings account." But my wife does have her own IRA account(with a larger balance than mine, partly because of certain funding laws in the U.S.) This is certainly old fashioned, and perhaps I am the one out of sync with what goes on in the rest of the world. But...when you are talking about financial independence, you have to consider what happens if she walks out, or something worse. Certainly a smaller condo does not 1/2 the price, and the poperty taxes won't be cut in half. And lighting and heating the house costs about the same whether there is 1 person or 4 people(except when you have kids that leave the lights on after they leave a room)
The last thing you mention is that income taxes are higher in Canada. That is one point you don't mention in your blog. My ER budget relies on one very key point(in my mind). My income will be entirely income tax free. Not because I have ROTH IRA's(I don't), and not because I invested in tax free municipal bonds(I didn't), but simply because: with the standard deduction, and exemptions, and the tax rate...I can earn the amount I need, and not pay any income tax. Zero..zip..nothing.
And no more SS tax, or medicare.
I assume the taxes on your 15k would also be tax free(or very small). I don't have any idea about the tax structure in Canada.
Taxes on food? I would hope not. Taxes on everything else...well the whole point is that we are frugal spenders, with few material needs, so by definition we pay less tax than the average spender.
And like I said in my first post, I wasn't trying to be negative. I was just looking for full disclosure. You have some special cicumstances...or at least IMHO.
But I am rooting for you.

10:56 AM  
Blogger Jack said...

Anonymous,

Hope I didn't offend you, I sure didn't mean that. I don't think you are old-fashinoned or out of sync, I just wanted to let you know how I perceive the idea of "one household, two checking accounts, two budgets" as being not that unusual among my relatives, friends and colleagues.

The tax structure in Canada is quite similar to that of the USA. Both use tax brackets, but there are more in Canada. Thus, you pay almost no tax if you earn <25k, but you pay quite a lot if you earn >60k and even more if you earn >100k (I think there are four progressive tax levels).

You said in a previous post that my situation was particular in that that having no child, my financial burden is much less that other people. This is true, but yet again, this fact might not be as striking in the province of Quebec as it is where you live. Again, I am not judging which system is better, but the facts are that in Quebec, due to a low birth rate, governments decided to share the burden of raising children by the whole society. Thus, parents get tax benefits, the government offer day care at 7$ a day, school is entirely free up to the university where fees are the lowest in North America (and low income people automatically get scholarship that cover fees and part of the subsistance costs). Dental care is also free for young children.

I don't know if this system is good or bad (personaly, I'm happy to pay for that, I thus feel I'm supporting a system that worked for me), but the fact is that even with no child, I'm paying through the tax system for other's childs. If I had children, my financial cost to raise them would not be that higher than it is now, since I would save thousands in income tax.

But I agree with you that we frugal people pay less tax, mainly since we consume much less.

Regards, - Jack

6:05 AM  
Anonymous Save On Gas said...

Your blog is really cool. If you get a chance go see my Save On Gas site, it will save you money on gas. It is http://www.kbgk.com

7:01 AM  
Anonymous Save On Gas said...

Your blog is really cool. If you get a chance go see my Save On Gas site, it will save you money on gas. It is http://www.kbgk.com

7:06 AM  
Anonymous Save On Gas said...

Your blog is really cool. If you get a chance go see my Save On Gas site, it will save you money on gas. It is http://www.kbgk.com

12:38 PM  
Anonymous Save On Gas said...

Your blog is really cool. If you get a chance go see my Save On Gas site, it will save you money on gas. It is http://www.kbgk.com

1:02 PM  
Anonymous ira distributions said...

Hi there Jack... Look where I landed searching for info on ira beneficiaries. But since Im here... I thought I'd just stop by and read... I found your post "My $15k budget" kinda interesting.
Do you always write that way?
I guess I'd better be on my way as I still need stuff on ira beneficiaries for my project.
Thanks for a good read Jack ...and keep doing all the great blogs. Cheers.

9:20 AM  
Blogger DomainerXxX said...

...............Save on gas site


What's 2021 going to look like if we don't start a new way of thinking!

www.SaveOnGasSite.com

4:59 PM  
Anonymous Anonymous said...

Right away I am going away to do my breakfast, after having my breakfast coming again to read further news.



Here is my homepage ... youtube derma roller stretch marks

1:22 PM  
Blogger ninest123 Ninest said...

ninest123 10.26
nike outlet, michael kors outlet, michael kors outlet online, gucci handbags, louis vuitton outlet, ugg boots, replica watches, polo outlet, burberry handbags, christian louboutin shoes, polo ralph lauren outlet online, christian louboutin outlet, oakley sunglasses, uggs outlet, christian louboutin, louis vuitton outlet, ugg boots, michael kors outlet, chanel handbags, ray ban sunglasses, jordan shoes, prada outlet, oakley sunglasses wholesale, nike air max, cheap oakley sunglasses, michael kors outlet online, uggs on sale, burberry outlet, oakley sunglasses, louis vuitton, christian louboutin uk, kate spade outlet, nike free, louis vuitton outlet, tiffany and co, replica watches, nike air max, longchamp outlet, uggs outlet, longchamp outlet, tiffany jewelry, longchamp outlet, ray ban sunglasses, michael kors outlet online, louis vuitton, prada handbags, michael kors outlet store, ray ban sunglasses

7:18 PM  
Blogger ninest123 Ninest said...

ninest123 10.26
nike outlet, michael kors outlet, michael kors outlet online, gucci handbags, louis vuitton outlet, ugg boots, replica watches, polo outlet, burberry handbags, christian louboutin shoes, polo ralph lauren outlet online, christian louboutin outlet, oakley sunglasses, uggs outlet, christian louboutin, louis vuitton outlet, ugg boots, michael kors outlet, chanel handbags, ray ban sunglasses, jordan shoes, prada outlet, oakley sunglasses wholesale, nike air max, cheap oakley sunglasses, michael kors outlet online, uggs on sale, burberry outlet, oakley sunglasses, louis vuitton, christian louboutin uk, kate spade outlet, nike free, louis vuitton outlet, tiffany and co, replica watches, nike air max, longchamp outlet, uggs outlet, longchamp outlet, tiffany jewelry, longchamp outlet, ray ban sunglasses, michael kors outlet online, louis vuitton, prada handbags, michael kors outlet store, ray ban sunglasses

7:19 PM  
Blogger ninest123 Ninest said...

sac vanessa bruno, louboutin pas cher, new balance, hollister uk, coach outlet store online, longchamp pas cher, nike tn, nike air max uk, north face, true religion outlet, lululemon canada, michael kors outlet, true religion outlet, coach purses, abercrombie and fitch uk, sac longchamp pas cher, polo ralph lauren, ray ban uk, vans pas cher, nike free run, air max, michael kors, north face uk, hollister pas cher, oakley pas cher, converse pas cher, nike free uk, nike air force, true religion outlet, coach outlet, jordan pas cher, sac hermes, guess pas cher, nike roshe, polo lacoste, nike roshe run uk, michael kors pas cher, ray ban pas cher, nike air max uk, kate spade, burberry pas cher, nike air max, nike blazer pas cher, ralph lauren uk, coach outlet, michael kors, hogan outlet, mulberry uk, timberland pas cher, true religion jeans

7:20 PM  
Blogger ninest123 Ninest said...

mac cosmetics, gucci, hollister, herve leger, babyliss, hermes belt, soccer jerseys, nike trainers uk, celine handbags, vans, abercrombie and fitch, jimmy choo outlet, giuseppe zanotti outlet, nike air max, ferragamo shoes, lululemon, ray ban, ralph lauren, iphone 6 cases, converse outlet, asics running shoes, ghd hair, north face outlet, valentino shoes, timberland boots, insanity workout, nike air max, north face outlet, nfl jerseys, chi flat iron, hollister, vans outlet, beats by dre, soccer shoes, longchamp uk, p90x workout, louboutin, oakley, mont blanc pens, mcm handbags, converse, reebok outlet, hollister clothing, baseball bats, wedding dresses, nike roshe run, bottega veneta, new balance shoes, nike huaraches, instyler, tory burch outlet, oakley sunglasses

7:23 PM  
Blogger ninest123 Ninest said...

louis vuitton, thomas sabo, michael kors outlet, louis vuitton, pandora jewelry, swarovski crystal, canada goose outlet, juicy couture outlet, barbour, louis vuitton, canada goose jackets, hollister, marc jacobs, barbour uk, moncler outlet, louis vuitton, canada goose outlet, supra shoes, canada goose, canada goose outlet, moncler uk, michael kors outlet online, toms shoes, wedding dresses, pandora jewelry, ugg pas cher, ugg,ugg australia,ugg italia, swarovski, doudoune moncler, moncler, pandora uk, moncler, moncler, juicy couture outlet, michael kors handbags, replica watches, ugg,uggs,uggs canada, ugg uk, pandora charms, louis vuitton, montre pas cher, moncler outlet, moncler, lancel, canada goose, ugg, doke gabbana, links of london, canada goose, karen millen uk, canada goose uk, coach outlet
ninest123 10.26

7:24 PM  
Blogger 柯云 said...

2016-06-15keyun
jordan retro 4
nike store
timberlands
asics shoes for women
coach factory outlet
true religion outlet store
kobe shoes 11
louis vuitton
michael kors outlet
adidas factory outlet
michael kors outlet clearance
montblanc pen
cheap toms shoes
michael kors handbags
coach factory outlet online
michael kors bags
coach outlet clearance
jordan retro 13
toms outlet
michael kors outlet online
gucci outlet online
ray ban outlet
hollister jeans
tods sale
oakley sunglasses
polo ralph lauren
beats by dre outlet
hollister clothing store
insanity workout
nike sb janoski
michael kors outlet online sale
michael kors purses
ralph lauren polo shirts
adidas yeezy
michael kors outlet online
ralph lauren sale
louis vuitton outlet
michael kors outlet
nike roshe shoes

9:01 PM  
Blogger Liu Liu said...

Nick Saban’s relatively brief time as head coach of the Miami Dolphins is not looked upon fondly by most fans of the team. He went 15-17 christian louboutin shoes in his two seasons, but basically quit on the nfl jerseys store team in the final weeks Nike Air Max 90 of the 2006 season, focused more on his next job, at the University of Alabama, instead of the one he christian louboutin uk was under contract for.And at least one player who played – or at Christian Louboutin Women Flat least practiced – under Saban during those ill-fated christian louboutin men flat final weeks Nike Roshe Run hasn’t forgotten NFL Jerseys how Nike Free Run he was louboutin outlet treated. According to Nike Air Max 2015 Shoes receiver P.K. Sam, a journeyman cheap nfl jerseys who spent time with five NFL teams as well as two CFL clubs, Saban cut wholesale nfl jerseys him after he left the team christian louboutin Panettone spiked leather wallet briefly to see his dying father

5:39 AM  
Blogger xjd7410@gmail.com said...

20171221 junda
mulberry uk
air max 90
coach factory outlet
soccer jerseys
herve leger dresses
yeezy boost 350
coach factory outlet
moncler outlet
puma outlet
supreme clothing

10:47 PM  

Post a Comment

<< Home