High-Level Personal Budgeting For 2015

We’re one week into the New Year and I’m trying to see if I can plan more than just my contributions to my RRSP & TFSA for 2015. With multiple vacations and a wedding this year, there’s a lot of big expenses that will take priority over small daily and weekly indulgences.

While I greatly admire endeavours like Anna’s Spending Fast or Cait’s Year-Long Shopping Ban, I’m not one to adhere to extreme methods to manage my spending. I don’t need to, and I don’t want to, so I won’t. Nevertheless, I don’t want to spend $1,000 on coffee that could have been better allocated elsewhere.

For this reason, I’m trying to adopt a full year’s perspective on my spending.

It’s very easy to budget for fixed costs like rent or Netflix, which are the same every month, but what I’m really seeking to manage are things like dining out and spending on clothes. All of my savings are transferred out of my chequing account and into the accounts they belong as I am paid, but my discretionary spending isn’t allocated in any specific amounts, and I have no set monthly limits.

Here is my 2015 Discretionary Spending Budget:

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(For those that are curious, I use Money by Jumsoft to manage all my finances, and I set this budget up directly in the app and this is a screenshot of it)

 

The yellow indicates that if we were to breakdown the budget on a daily or weekly basis, I’m already edging over in those categories for this year. Thankfully, this is a no spend weekend so I should fall back under budget in the next few days!

Mixed Categories (include personal spending + some joint spending):

Wedding, Vacation, Dining Out, Alcohol, Gifts, Household, Leisure

Personal categories (exclusively my personal spending):

Coffee, New Clothes, Jewelry, Charity, Personal Care, Online Business

I don’t track my fiancé’s spending (he’s responsible for that!), but I do track what comes out of the joint account. We still keep most of our spending separate, except for shared expenses four our household which comes out of our joint account, but occasionally we will buy things like dinner out or event tickets from the joint account. I don’t care for the minute details of my budget, which is why I don’t separate these categories into things like “joint gifts” and “individual gifts”, but it is important to recognize all of these number in the budget are inflated to include my spending plus our spending (and as I said before, his spending is his own).

For the categories that are exclusively mine, I didn’t follow any formulas like taking a percentage of my income. My whole strategy was merely thinking about what I felt was appropriate or comfortable, and putting that number down. This is not necessarily a method I would recommend if you’re new to budgeting, but in my situation I have a good intuition of what I can afford without breaking out a calculator. For the numbers that seem “big” remember, 1) some of these are joint expenses and 2) my fiancé and I are DINKS = dual income, no kids — and dual big incomes at that. I have no qualms about spending $500/yr on coffee, no matter what The Latte Factor says.

So I’m not setting any strict rules of how much I can spend in a week or a month,

but I will check my annual budget every so often to see if I need to scale back in one category. 

For me, this is budgeting enough. I track my money down to the penny but I’m not going to plan down to the penny!

Could you and your partner live on just one salary?

One of the things my fiancé and I are considering doing once we tie the knot is going down to living on one salary. It might seem a little extreme, but the financial reward is so massive it’s hard to find any flaws with the plan.

We’ve been talking about it for a few months, and we think after our wedding in October, we’ll be in the right place to switch to living on only one income. If you think we’re crazy, here’s my rationale:

We can afford it.

I think one of the best things about going back to school for my MBA was I was forced to live like a student, and even now that I’m employed full-time again, I’m still living a more modest lifestyle than I would (or will) when I get used to my income. My fiancé is just one of those naturally frugal people, and thankfully has never been foolish with his money. As a result we have only one car between us, we eat most of our meals at home, don’t shop excessively (ok, not too excessively), and have inexpensive hobbies.

Additionally, most of our purchases, from groceries to concert tickets, are already bought together and therefore already coming out of one bank account. So we’re used to sharing money.

We’re both high earners, and the combination of modest living with powerful paycheques leaves a lot of breathing room. I make slightly more than my fiancé (though he recently got a promotion, so the gap is narrowing), which factored into our decision about whose salary to save and whose to spend. Both of us individually make enough to pay all the bills and still have cash left over, but when it comes to picking which cheque to keep in the bank, the bigger one is clearly the better choice. It’s an incredible position to be in, and we want to maximize the benefits of it. I know it’s a luxury to not need two incomes to support two people, and I am very grateful we are in such a position.

How would we do it?

We’d live on his salary while splitting mine equally between our individual savings accounts. In other words, his full paycheque would be deposited to our joint chequing account, and my paycheque would be dividend in half, with each of us receiving the same amount to deposit in our TFSAs, RRSPs, and unregistered savings accounts based on the most appropriate asset allocation. If any of his salary is leftover in our joint chequing account at the end of the month, we’ll transfer it to our joint savings account. This means we’ll be living on 40-50% of our incomes while saving the rest.

It’s easy to use up your salary when you have to split it up into bills, saving, and spending, but if we allocate all my income to saving and all of my fiance’s to bills and spending, it actually feels like more. It’s not, of course, it’s the same number of dollars just allocated differently, but it reduces the burden of budgeting to something fundamentally simpler: two paycheques, two categories – spending and savings. Furthermore, much like contributing the same amount to our joint chequing account, divvying up our money equally keeps any “mine and yours” arguments away because everything is appropriately “ours”. I never want money to be something we worry or fight about, and this is another way to protect against that.

If this is such a great idea, why wait?

It’s tempting to execute this plan immediately, but we’re choosing to wait until the marriage papers are signed for a number of reasons, not the least of which is legally becoming husband and wife before merging assets and incomes. Furthermore, we’re still slightly off-balance individually, as I’m still paying for my MBA and am only 3 months into my new job. We’re taking the months before our wedding day to balance our accounts the way we want them before we go all-in together. For example, he has more in his TFSA than me because I used my savings to go back to school, but I have more in my RRSP because I started saving earlier. Both of us want to “catch up” in our respective registered accounts, so that when savings is distributed equitably from my paycheque, we’re each saving the same amount. We also have the expense of the wedding itself, which some things we are paying jointly for (like the venue) and others we are paying for individually (like my dress and his suit). Ultimately our money is our money from now on, but for the ease of bookkeeping we’re procrastinating this plan until after our nuptials.

Would we do it forever?

Aside from saving in an RRSP, I don’t like to make plans more than 3 or 5 years out. I can’t predict our lifetime earnings, stock market fluctuations, or what kinds of challenges will befall us individually or as a couple. I do know living on one salary is a powerful defense against one partner being laid-off, and that provides a incredible amount of financial security. This is coupled with the financial security provided by amassing a huge amount of savings by banking the other partner’s income. But what we can afford right now is not the same as what we can afford forever. However, if our incomes grow with career progressions, there should be no reason why we can’t commit to living on one income for the foreseeable future.

Crazy or genius? Could you and your spouse live off of just one income?

My Credit Card Is My Single Most Powerful Budgeting Tool

Maybe the title of this post surprised you, as credit cards are often villified in the personal finance community. However, if you’re out of debt and you can manage credit without overspending, a credit card has more perks than pitfalls.

I have two main credit cards: gold American Express card, which costs $150 per year, and the no-fee MBNA cash-back rewards card.

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I used to have the Platinum American Express card, but downgraded to the gold card when I went back to school. I really, really miss my platinum card and the airport lounges and my free car rental upgrades and my gift cards to Coach… sigh. Maybe next year I can get it back.

Whenever possible, I charge all purchases to my American Express.

At stores that do not accept American Express, I pay with my Mastercard.

I have a third no-fee, no-useful-rewards Visa card that I’ve had since I was 18 that I don’t use but just keep buried in a drawer because I constantly go back and forth about cancelling it. On one hand, it has the longest history (nearly 11 years!) but on the other, it never gets used so maybe it’s credit history doesn’t matter. I keep it out of a mix of being to lazy to cancel combined with a sense of emergency preparedness that, if my wallet were to get stolen again, I would be able to access money while waiting for replacement credit and debit cards to come in.

How My Credit Card Helps Me Budget

1. My credit card statement lists my spending, down to every penny. As much as I like money, even I find it tedious to write down where my every cent goes. My credit card statement is a perfect record of where my money has gone. (note: it’s possible for your credit card to contain mistakes and erroneous charges, which is why it’s important to check it against your receipts. Because I manage my transactions manually in the budgeting software I use — Money 4 by Jumsoft — I look at my credit card statement online 1-2 times per week to make sure it matches my own records)

2. All my regular bills are charged to my credit card, reducing the number of due dates I have to remember from a half-dozen to just one. I don’t know or care when my credit card, Netflix, or cellphone bills come in — they are all automatically charged to my credit card and I know when my credit card bill comes due!

3. I rack up the rewards points like crazy! By making an effort to put all my spending on plastic, I spend over $1,000 on my credit cards every month. On the American Express this will translate to 1,000 Amex points, or the equivalent of $10 (a 1% return). Already this year I’ve used Amex points to pay for over $250 of hotel stays when I went out of town to attend weddings. I love how Amex let’s you select how many points you want to apply to recent travel purchases:

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 *Note: even thought the American Express is “my” card, I use the points for joint spending with my boyfriend, like these hotel stays. Both weddings we attended were for cousins of mine, so I felt like because I dragged him all the way to Edmonton for my family events, the least I could do was help with the costs of our hotel stays. It’s just another way we share money after our joint chequing and joint savings accounts.

The only reason my credit card works for me as a budgeting tool is because I never carry a balance.

I usually make payments against my credit card balance 2-3 times per month. I have to — it gives me anxiety whenever I see it creep over $700! I’ve finally developed that magic personal finance sixth sense where I can just *feel* when my balance is getting too high and I just pay it down. This is the best practice because I never pay interest on any of my purchases.

If you owe a balance on your credit cards, DO NOT USE THE CARDS JUST TO GET REWARDS. The rewards don’t negate what you pay in interest, so you’re still operating at a loss. Put the cards away, kill the debt, and when you’re down to zero wait a full month, and then you can start using the cards again.

My credit cards make managing my finances easier, but I know it’s not for everyone. Anyone else have a great rewards card or other credit card that helps them budget?

Setting Up The Joint Savings Account

I blogged a few weeks ago about how my boyfriend and I manage our joint chequing account, so I thought I would follow with a post about the joint savings account we set up.

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Balancing finances with your partner – no easy feat!

I actually found setting up a joint savings account a little bit more scary than sharing a chequing account. Because our contributions to the joint chequing account are only in $625 increments and the account is emptied every month, there’s not a lot of money on hand you have to trust your partner with. Even if the account was allowed to build up over the period of 30 days, the most damage either of us could do is spend the other person’s $1,250 monthly deposit. This is enough to really piss me off, but over the long term has no real consequence on my finances.

Joint savings accounts require more trust because there’s more money involved.

We’re going to start small, but as the months go by, our joint savings account will grow and it won’t take long for it to exceed the balance in our joint chequing account. When it hits $3,000 or $10,000 and so on, it’s suddenly a lot of money — half of which is yours that your partner has full access to. I have never let anyone have access to my money before so this is a big step!

I opened our joint savings account on September 1st with $100.

My boyfriend deposited $100 of his own money, and then we each set up regular contributions from our individual chequing accounts.

Now is a good time to do it, as Tangerine is offering 3% interest until November 30th on a new deposits made between now and September 15th. That’s better than 3 year GICs so I’m trying to get as much in our joint savings account as I can to take advantage of this great rate! If you don’t have an account with Tangerine, you can set one up using my Orange Key (32251507S1) and receive an additional $25 bonus. Lots of free money to be had!

Since we’ve also both decided to tone down our spending for the month of September, I’m hoping there will be an extra $200-$300 left over in our joint chequing account at the end of this month that I can transfer to our joint savings account.

Our main goal for the account right now is a tropical vacation sometime this winter. 

Once we come back from sunny-wherever, we’ll start building up the account again for another vacation together, or major joint purchases that might come far in the future, like a replacement car or down-payment on a home.

Rules of the Joint Savings Account

1. Like the joint chequing account, it’s important to us that each partner contributes to the joint savings account equally. This is why we’ve opted to each contribute the same amount each month, and any extra will come out of our joint chequing account.

2. The money in the joint savings account can only be withdrawn with the other partner’s consent and is ONLY for joint purchases, such as vacations together, furniture for our shared apartment, a car for both of us, or a future home. It is not for individual major ticket items like laptop computers, bikes, etc. — we have to save for those on our own!

3. Contributing to the joint savings account comes only after contributions to our individual TFSAs and RSPs have been made. It is more important that we are individually prepared for financial emergencies, retirement, and long-term financial goals than it is that we take a vacation together or buy a new car. If for whatever reason one of us is short money one month, the joint savings account contribution is skipped so contributions to RRSPs and TFSAs can be made.

4. The purpose of the joint savings account is for us to enjoy spending our money together as a couple. If contributing becomes a financial burden to one or both partners, we will stop and go back to managing our savings exclusively as individuals.

Do you share savings with your partner? How do you squirrel away money together?

The $0 Weekend

Back by popular demand (and my own return to full-time student status!)…

The $0 Weekend – How to spend your weekend on the tightest budget ever: free

The-Mindy-Project-poster1. Watch The Mindy Project I’ve liked Mindy Kaling since her time on The Office. Last year I read her book and it was laugh-out-loud funny, and she delivers even more in her show, The Mindy Project. Now on Netflix and only 21 minutes per episode, you can occupy yourself for the next 48 hours in a full Mindy-Marathon — and you won’t regret it. I’m already finishing up season 2.. and I just started watching 2 weeks ago!

126051572. Borrow The $100 Startup from your library I will likely be devoting a whole post to this book on its own, but you’re going to want to get a head-start, because if you’re anything like me you’ll be reading it a few times over. I keep going back to use the checklists or ideas, or even just to get a kick of motivation on a project. Even if you don’t borrow the book, you might find something on the website, which provides everything from a 1-page business plan to a 39-point product launch checklist. IMG_90312-768x1024

3. Learn to cook a Paleo recipe Paleo is so trendy right now, you might as well get on board because without a doubt, next time you have people over at your house, one of them will be Paleo and they’re still going to need to eat. I totally dig Paleo from a distance and love the theory behind it, but in practice I just can’t give up my favorite foods, which consist almost entirely of baked goods. Nevertheless, the great thing about Paleo foods and recipes is all, yes ALL, of them fit into the healthy diet I maintain for my gym routine so even I’ve found myself taking down the details for a Paleo meal even though all I did was google “healthy recipes. If you can’t fight them… Well I found these Coconut & avocado grasshopper bars that don’t look too bad!

4. Pick a yoga pose and start working on in for at least 5mins/day The secret to achieving any challenging posture in yoga is consistency, but it’s unrealistic for most of us to visit a yoga studio for a full class every day. It is not, however, unrealistic to practice one pose for only 5 minutes a day. Now that I’ve gotten my arm & chest strength up to a level that can bench-press a weight that is more than that of a small dog, my current focus is nailing advanced variations of crow pose. If I can just get my balance to match my killer core strength, I should be able to get flying and side crow any day now… and I’m striving towards this a little bit at a time, at 5 minutes per day.

5. Check out Taylor Swift’s new music video When I heard the iTunes preview on this song, I didn’t really like it, but once I listened to it straight-through and saw the music video is was the good ol’ TSwizzle we know and love. This is the perfect house cleaning song, so it’s worthwhile to put it on full blast and give your place a good scrub. My parents arrived from Salt Lake City on Wednesday so I have Taylor to thank for motivating me through housekeeping duties to make my apartment meet my parents standards. Have a great weekend!