Personal Finance

Help with creating a budget

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  • Jul 6th, 2015 8:18 pm
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Member
Mar 18, 2015
238 posts
184 upvotes
Mississauga, ON

Help with creating a budget

My GF and I are considering buying a house and need help putting together a budget.
We both live with our parents so don't have any numbers to go on aside from a few guestimates.

Combined we make roughly 155K/year
Lets say we have $9000 after tax income per month

Here are some line items in our budget
Savings: $650
Mortgage: $2500 (550K @ 2.6% for 25 years)
Property Tax: $500 - guess
Utilities(Gas/Electric/Water/Internet/insurance): $500 - guess
Car Payments: $300 (we have 2 cars, one is paid in full)
Car Insurance: $450 (she's a terrible driver)
Fuel: $650 (I drive far for work)
Groceries: $400 - guess
Cell Phones: $70
Parental Support: $800 (we're Asian and expected to give money to our parents)
Loan Payments: $1000
Fun Money: $700

So after all those, we'll have about $480 at the end of the listed expenses.
Is there anything in that I'm missing in my budget?
Are we stretching ourselves?
Is there anything I'm under estimating?
14 replies
Sr. Member
Feb 10, 2015
608 posts
228 upvotes
restie wrote: My GF and I are considering buying a house and need help putting together a budget.
We both live with our parents so don't have any numbers to go on aside from a few guestimates.

Combined we make roughly 155K/year
Lets say we have $9000 after tax income per month

Here are some line items in our budget
Savings: $650
Mortgage: $2500 (550K @ 2.6% for 25 years)
Property Tax: $500 - guess
Utilities(Gas/Electric/Water/Internet/insurance): $500 - guess
Car Payments: $300 (we have 2 cars, one is paid in full)
Car Insurance: $450 (she's a terrible driver)
Fuel: $650 (I drive far for work)
Groceries: $400 - guess
Cell Phones: $70
Parental Support: $800 (we're Asian and expected to give money to our parents)
Loan Payments: $1000
Fun Money: $700

So after all those, we'll have about $480 at the end of the listed expenses.
Is there anything in that I'm missing in my budget?
Are we stretching ourselves?
Is there anything I'm under estimating?
This makes me laugh so hard. If your parents need help that is one thing but if they want the money "just because" they need to give their heads a shake. Who want to cripple their children financially just because of some outdated custom?
Deal Guru
Dec 11, 2008
13069 posts
3758 upvotes
Make sure u use realistic expenses for fun money or misc:
- vacation
- gifts
- what about eating out budget? Bday dinners etc
- household crap (laundry detergent, cleaners, kleenex and paper towel and soap etc)
- clothes
- no public transportation?
- health/dental etc
Deal Addict
Jul 29, 2006
4253 posts
1078 upvotes
car maintenance/repair and emergency fund
Deal Addict
User avatar
Apr 24, 2006
1396 posts
1058 upvotes
GTA
There is some very useful information here https://www.tdcanadatrust.com/planning/ ... budget.jsp and a comprehensive Excel template that will help OP set up a complete budget and not miss out anything.
"Just because something is on sale doesn't mean a) you can afford it, b) you should buy it, c) you need it, d) you're not spending far more buying it than not buying it at all"
Deal Expert
Aug 22, 2011
41802 posts
30057 upvotes
Center of Universe
Only $480 left over...you will run into serious problems!
Pay off the car and loans first, or buy a smaller house.
Deal Addict
Apr 13, 2015
1108 posts
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Good luck with the $400 food budget especially if you end up with kids. My wife and I with two babies under 3 spend about $900/month.
Deal Fanatic
Sep 23, 2007
5654 posts
2168 upvotes
restie wrote: My GF and I are considering buying a house and need help putting together a budget.
We both live with our parents so don't have any numbers to go on aside from a few guestimates.

Combined we make roughly 155K/year
Lets say we have $9000 after tax income per month

Here are some line items in our budget
Savings: $650
Mortgage: $2500 (550K @ 2.6% for 25 years)
Property Tax: $500 - guess
Utilities(Gas/Electric/Water/Internet/insurance): $500 - guess
Car Payments: $300 (we have 2 cars, one is paid in full)
Car Insurance: $450 (she's a terrible driver)
Fuel: $650 (I drive far for work)
Groceries: $400 - guess
Cell Phones: $70
Parental Support: $800 (we're Asian and expected to give money to our parents)
Loan Payments: $1000
Fun Money: $700

So after all those, we'll have about $480 at the end of the listed expenses.
Is there anything in that I'm missing in my budget?
Are we stretching ourselves?
Is there anything I'm under estimating?
Looks like a good list. You'll always miss something because life is life. Something unexpected always pops up. As long as you set aside some funds for contingencies, you should be ok.

Underestimate? I find your groceries budget low. Aside from that, it's hard for us to comment on whether it's high or low as you have control over many of these things.
Deal Expert
Aug 2, 2001
18946 posts
10528 upvotes
Since neither of you have been on your own, I would consider these one-time expenses when saving:
- Household furniture (couch? chair? blinds? pictures? bookshelf? bbq? etc.)
- Household consumables (cleaning products?)
- Household maintenance/minor renos (light fixtures? paint? kitchen drawer pulls?)
Many do not realize all the things you need, and all the things you will want, with your new house. Even just buying all your cleaning supplies can be very expensive if you are on a tight budget, nevermind all the furniture you will want to buy.

From your monthly total, I would look at:
- Vehicle maintenance
- Parking tickets/traffic infractions (you mention your partner is a very poor driver - does she spend $100 in tickets every month? It is not as uncommon as you think)
- Utilities/insurance/etc.: you have a pretty broad range of items in here, $500 may or may not be enough. This depends on things like the level of insurance coverage you want, because the more coverage the more you pay. For example, I pay over $100/month, whereas others I work with pay $50-60/month. I would personally break this line item into multiple parts - home insurance, utilities, cable/internet to gain more clarity. That, and you can accurately determine what something like cable/internet will cost.
- Savings: What is the purpose? Emergency fund? Vacation fund? Education fund? New appliance fund? One issue I find is that many people "save" without a goal, and then when life happens (furnace breaks, etc.) it diminishes their savings. But, because they planned on taking a nice vacation they still do, leaving them in debt to pay for it. You and your partner should be on the same page for what "savings" means, especially when you deal with $8000/year in savings. With the availability of no fee bank accounts, why not have a couple different ones: vacation, emergency (with a cap of course) and home improvements (or whatever you want to save for)? This allows you a much more visual insight into your savings because a large savings accounts will just look large, and you may think "I have all this savings", while forgetting that you promised to use it for a new stainless steel double door fridge at a cost of $2000.
- Clothing
- Personal care: hair cuts? nails? expensive makeup? Some people spends hundreds on their grooming every month. Other spend a hundred on various creams/makeups every month. Are either of you like this?
- Charitiable donations: Do you support a cause? Do you want to support a cause?
- Restaurants: Do you want to specifically have this as a line item?
- Alcohol: Is this a big expense for you? Are you someone that buys a bottle of grey goose every week? 2-3 bottles of wine?
- Medical: everyone needs something from time to time - glasses? physio? massage? prescription? health care premiums?
- Parking

I think you are doing a great job by talking about this ahead of time and trying to plan for it. This is a big step. Remember that what works for some will not work for you, the key is finding something that works for you and your partner. I personally like to do a bit more on categorization rather than having a giant "savings" or "fun" amount, because we want the insight to see where the money goes. We want to know "hey we spent $xxx on restaurants last month" or "wow, we spent $xxx on booze last month". This applies to your budget now - you need to know what you spend now on these things to budget for them, and if you know, why not make them a bit more concrete instead of vague?

Again, good luck to you and your partner. Find something that works for you, that's the most important thing. I am sure you will get a lot of replies, read them through and at least try to understand where the poster is coming from (even if you do not agree with them). This may help spark other ideas/thoughts.
Deal Addict
Nov 25, 2014
1739 posts
960 upvotes
Newton Brook, ON
DanTh3Man wrote: This makes me laugh so hard. If your parents need help that is one thing but if they want the money "just because" they need to give their heads a shake. Who want to cripple their children financially just because of some outdated custom?
Generally, this custom would only leave one financially crippled when one's children decide to stop following it. Calling it "outdated" suggests that there was a change at some point in history that would have given a reason to stop following it that didn't exist previously - what do you suppose that change was?
Deal Expert
Aug 2, 2001
18946 posts
10528 upvotes
nmclean wrote: Generally, this custom would only leave one financially crippled when one's children decide to stop following it. Calling it "outdated" suggests that there was a change at some point in history that would have given a reason to stop following it that didn't exist previously - what do you suppose that change was?
Would a potential change be someone who is now in a country receiving a variety of social support benefits (OAS/GIS) and other benefits (CPP) that previous generations did not receive?

I do not want to wade into whether the support payments are right or wrong because it is more a cultural debate to me (similar to in some cultures the bride's parents foot the wedding bill), however if the parents are receiving Canadian-based social services and additional Canadian-based income (that was not prevalent in their former country) then this could be a potential reason they children feel like they do not have to contribute - because all of Canada is contributing and the parents are receiving income that did not exist in previous generations.
Member
Mar 18, 2015
238 posts
184 upvotes
Mississauga, ON
vkizzle wrote: Only $480 left over...you will run into serious problems!
Pay off the car and loans first, or buy a smaller house.
What's a good number to aim for?

So far the number in there that we'll most likely play with is the mortgage amount.
We're pre-approved for 600K mortgage, but doing all 600K is not a very good idea.

The savings is going into RRSP. I've got employer matching and that's the max they're going to match. Not really saving for anything in particular. Just putting it away.

We've got about 160K saved up for down payment.
I've got 5K left on my loan, but she's got about 25K left on her loan.
Got about 15K left on the car payments.
Would it make sense to take some of that savings to pay off the loans and car and decrease our down payment?
Deal Expert
Aug 22, 2011
41802 posts
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Center of Universe
restie wrote: What's a good number to aim for?

So far the number in there that we'll most likely play with is the mortgage amount.
We're pre-approved for 600K mortgage, but doing all 600K is not a very good idea.

The savings is going into RRSP. I've got employer matching and that's the max they're going to match. Not really saving for anything in particular. Just putting it away.

We've got about 160K saved up for down payment.
I've got 5K left on my loan, but she's got about 25K left on her loan.
Got about 15K left on the car payments.
Would it make sense to take some of that savings to pay off the loans and car and decrease our down payment?
I always advocate to pay off a mortgage as soon as possible (after taking care of loans with the higher interest rate).
Aim for 20%, as the min down payment and set aside ~2% for closing costs.

Once you clear all your consumer debts, drop yearly lump sums towards your mortgage and you'll be done in no time.
Deal Addict
Jan 2, 2015
1633 posts
639 upvotes
Toronto, ON
restie wrote: My GF and I are considering buying a house and need help putting together a budget.
We both live with our parents so don't have any numbers to go on aside from a few guestimates.

Combined we make roughly 155K/year
Lets say we have $9000 after tax income per month

Here are some line items in our budget
Savings: $650
I understand this is all the "rage", but I don't put that in my budget. I want to save $1000 per month, but sometimes life happens and it's not possible.
Mortgage: $2500 (550K @ 2.6% for 25 years)
The two of you haven't moved out yet. You don't know if this is realistic. Rates may go up... or even down! They certainly won't stay static over 25 years. You want to keep this number as low as possible, because inevitably it will go up at some point.

You live in Mississauga, a pretty big city, and you don't have any children. You don't need a full-size house. You could literally do with a one bedroom condo in a space-deprived city. I'm not sure you need to be spending so much on shelter. (A bachelor apartment can be found for $1000 per month in Toronto, where RE prices are probably a little higher. That's one-bedroom, but you're a childless couple, you don't actually need more space than that. Obviously not if you want to own rather than rent.)
Property Tax: $500 - guess
Utilities(Gas/Electric/Water/Internet/insurance): $500 - guess
Car Payments: $300 (we have 2 cars, one is paid in full)
Car Insurance: $450 (she's a terrible driver)
Mississauga has a halfway decent transit system. Could you sell one car and have her rely on that? You can save on fuel, parking, insurance and car payments. That's not always practical though.
Fuel: $650 (I drive far for work)
Groceries: $400 - guess
Cell Phones: $70
Parental Support: $800 (we're Asian and expected to give money to our parents)
Is this how much you're paying now? That's effectively rent when you live with them. If you move out, you should be able to pay less. You might have to do some delicate negotiations.
Loan Payments: $1000
This one is a big of a "red flag". See what I did there? (The pun wasn't intentional until after I typed the first sentence.) Are these student loans? They're more than your car payments, which is usually your second biggest expense. If they're student loans, I'd recommend waiting until you've paid those off before moving out. $1000 per month that you no longer need to spend is a great way of building up an emergency fund.
Fun Money: $700

So after all those, we'll have about $480 at the end of the listed expenses.
While I don't like putting "savings" as an "expense", you're actually saving $1000 per month, which might not be terrible. The question is, what are you doing with those savings? Do you have a pension plan? If not, are you putting some of these into RRSPs? Of course I think the expenses are going to be even higher.
Is there anything in that I'm missing in my budget?
Clothing (as adults, this is probably not a huge expense; I just bought some winter gear because it's cheap right now, so I'm thinking about it). Grooming (how often do you get a haircut, and how much does that cost?). Laundry (I pay about $15/month, and have no idea what a typical rate is). Medical (could vary considerably). Snacks. Vehicular maintenance. New home expenses (eg furniture, legal fees). Unfortunately, some of these expenses won't be "regular". Even "regular" expenses can get difficult to measure if you buy in bulk.
Are we stretching ourselves?
Probably yes. You live in a city where space is at a premium and have no children but want to live in a house rather than a condo. You have loan payments of 40% of your preferred mortgage payment schedule. I don't know if you pay rent right now, so it's hard to say what the gap would be.

While rent always increases, if slowly, mortgages change at unpredictable rates. (Supposedly a 1% increase in rates results in 10% higher payments. I need to tackle a few mortgage calculators to see if that makes sense.) I would certainly ask questions such as "if the payments went up 10%, how much "profit" would I lose per month?"
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Apr 20, 2011
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Vancouver
$400 is enough for groceries unless you're buying completely organic first class stuff at whole foods or something like that

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