Need advice with my budget, thanks!

[agatha1939]

Hi everyone, I'm a newbie here though I have been reading the forum for some weeks already. I would like to post my budget and get some advices. For information, I am in Canada; I’m single, mid-thirties, no kids, no car, no student loans or any other debt (just one stupid CC).

I just want to give some information about my mortgage; most people will probably think it’s too much for my income. Regarding my house – well, I live in Toronto and you wouldn’t believe the prices in my city. There is NO WAY I could afford a house here, even a very small townhouse, for less than $350,000! I paid $230,000 for my condo, which was the absolute maximum I could afford. I am not going to lie; it’s a very nice condo, big and in a wonderful area (very very safe). I could have bought something cheaper, but again, I’m alone and I wanted the biggest investment of my life to be something where I could live forever (unless I get married in the future ).

So I bought a house 9 months ago – a condo actually – in an “expensive” area of my city (Toronto), so the mortgage was big and the payments are high. Downsize to a cheaper house is not really an option for me, living is this area allowed me to not need a car, I use public transportation and I consider my condo a huge investment (price increased $25,000 already). Not to mention the safety in my area, VERY important for a single woman living in the city. It was my option to live in this area and I’d rather cut costs in other areas of my life.

The condo fee is high but at the same time, not high at all. I remember seeing other condos – much smaller than mine, but newer, with more facilities in the buildings, etc – and the fees started at $600-800/month! It’s really ridiculous but this is how the market is now. As I said, my condo price is already $25,000 higher than what I paid 9 months ago, so it’s an investment. And I’m planning to stay here for at least a loooooonggggg time.

Anyway, here is my budget:

Income:
From my gross salary, I contribute 4% for my RRSP (retirement plan) and get a match from my company. After that and taxes (I pay a lot, maybe because I’m single?), I bring home a net monthly payment of $2,939.50

Expenses (monthly):
Savings: $200.00 (EF and Vacations)
Donation: $10.00
Mortgage: $1,341.99
Condo Fee: $374.68
Taxes: $152.63
Home Insurance: $10.32
Water heater rental: $10.39
Electricity (heating/AC):$100.00
Internet/Cable/Phone/Wireless: $125.00 (is that too much?)
Transportation (Bus): $100.00 (I keep my passes to write off at tax time)
Food/Drink/Cleaning supplies: $125.00
Pharmacy/Vision (I use lenses): $30.00
Rental Car (I rent a car once a month): $40.00 (rental+gas)
Entertainment (I eat out with my co-workers once a month): $15.00
Extra (blow money): $15

I have one CC with $8,400.00 balance at 4.99%. I have no idea how to calculate the minimum payment, last month my balance was $8,623.89 and the minimum was only $53.00 (I paid $223.89).

Please advise, I need help!
:-)

Thanks!

[jIM_Ohio]

first- not sure on canadian tax law, so the things which work in the US of A (mortgage interest is tax deductable) may not work in CA NA DA.

second- love Toronto. Been there a few times and was even sober for one or two of those visits. Love Canadian beer.

I would question saving for a vacation when you have 8k in CC debt. If you doubled the cc payment (from $223 to $423) then I would think that whole $423 would be available for the EF and vacation quite soon ($423 pays that off in about 2 years, where as $223 is a 4 year or longer proposition).

Not sure why you rent a car (go home for the weekend?), but that same $15 would also drop a month or two off the repayment cycle of the cc.

[agatha1939]

It's a shame but in Canada our mortgage interest is not tax deductable.


I rent a car once a month to visit some friends out of town and mostly to do some "heavy" shopping (when I have to buy water, big bags of flour, etc). It's not really a NEED, but it does make my life much easier (it's not easy to do grocery shopping in a bus hehehe). But if I need it, I can cut that out.

I have the vacation savings because I'm alone in Canada, all my family lives abroad and I want to visit them once every 2-3 years. I went in 2006 and I "should" be going this year again, but I will postpone it to next year. I do have to go though, my mom (and my dad) are not young anymore and they miss me.

[maat55]

Going by my guidelines, your way out of wack.

Your housing cost is 63% of your take home pay.

How did you get a balalnce of 8400 on your card? My guess is, it has nowhere but up to go with these expenses. You are justifying wants as needs. You should move in with your parents and payoff debt.

[LivingAlmostLarge]

hello canuck. Great deal on the condo in Toronto, it's not too expensive. I should ask do you get a pension with your employer?

Also instead of renting a car do you have zipcar in your city? I think it would be cheaper than $40.

If you are single why not get a second job and pay off the credit card since you have extra time.

I love toronto's transit by the way!

[Gailete]

You should move in with your parents and save a lot of money.

Uh, Maat she already said her parents/family live abroad.

[Gailete]

Actually I think you are doing well. Last time I was in Toronto I looked through the homes for sale guide and was gob-smacked by the prices and that was almost 4 years ago. Eventually your mortgage will probably be more in line with your paycheck and your safety and the fact you can use public transit is very important. Think of it as having transferred $4-500 of car expenses onto your condo. Too bad you don't get a tax deduction.

By my calculations, you have about $300 unaccounted for. Is it gone at the end of every month or have you been putting it on the credit card bill? To have gotten such a large cc bill means you have been charging stuff instead of using cash. The best thing you can do for yourself is start using cash or a debit card for everything so that the cc bill doesn't go up any more. At the same time have a preset amount such as $200 that you will without fail pay each month towards that bill without charging anything else. The cc bill will eventually dissolve. Any extra amounts that you get should be divided between your cc bill, your EF/vacation fund and if possible paying down your morgage.

If you could handle a second job, all of that should go towards the cc and getting out from under the mortgage. I don't know about Canadian mortgages so be sure you can prepay on it prior to doing so. How many years is it for? Won't that be nice when it is paid off and all you have is the condo fee? Is it possible to get a roommate to help with expenses.

Because of your family being a distance elsewhere, I certainly understand the desire to visit every few years, which is why I would encourage you to divide any extra finances into three parts instead of two.

I do think your internet/wireless is way too much and you should probably study up on what you really need and who has the best price. Books are so much more fun to read than watching TV.

Gail

[agatha1939]

Well, moving back with my parents is out of question, I'm an immigrant in Canada and I'm not coming back to my parent's country, I want to be here. I don't have any family (or close friends) I can move in with, I could get a roomate but I don't feel too confortable with that. I'll think about it though.

Originally Posted by Gailete

By my calculations, you have about $300 unaccounted for. Is it gone at the end of every month or have you been putting it on the credit card bill? To have gotten such a large cc bill means you have been charging stuff instead of using cash. The best thing you can do for yourself is start using cash or a debit card for everything so that the cc bill doesn't go up any more. At the same time have a preset amount such as $200 that you will without fail pay each month towards that bill without charging anything else. The cc bill will eventually dissolve. Any extra amounts that you get should be divided between your cc bill, your EF/vacation fund and if possible paying down your morgage. Gail

I got this large CC bill because I charged my 2006 trip to Brazil there and also my furniture when I moved to my new condo. It was of course a huge mistake, and if I knew before what I know now, I would never do that. I cannot go back in time though, so I'm trying to clean my mess. I never used CC to pay for bills or something like that.

I stopped using my CC in March, I don't even carry it with me anymore and I'm using only cash for everything. My mortgage is 5-year fixed at 4.0% and my salary goes up every year, so eventually my mortgage will be more in line with my paycheck. Although it's too much, I don't "worry" about my mortgage, it's something that I am happy to pay for, I love the fact that I don't need a car and live in a very safe area. I still have 20 years to pay down my mortgage.

Any extra amount I have I put towards my CC debt. I like your idea of having a set amount for the CC and dividing the rest between my savings and extra payments in my CC. I'll do that.

Originally Posted by LivingAlmostLarge

hello canuck. Great deal on the condo in Toronto, it's not too expensive. I should ask do you get a pension with your employer?

Also instead of renting a car do you have zipcar in your city? I think it would be cheaper than $40.

If you are single why not get a second job and pay off the credit card since you have extra time.

I love toronto's transit by the way!

I have a RRSP group plan with my employer, they match up to 4% of my contributions, so this is what I'm doing now. I used to contribute 15% but I changed to 4% 2 months ago when I decided to attack my debt. After paying my CC I would like to increase that to 15% again.

I'll cancel my internet/cable/phone package, I'll just keep the celular phone (which I hardly use, but I need some form of comunication). I'll check zipcar and if it's cheaper I will do that. I really don't rent a car every month, maybe once every 6 weeks, but it's an expense for sure.

Thanks for the suggestions!

[maat55]

Eliminating 8400 in CC debt while having little wiggle room is going to be a long and difficult process.

The key things you have to do, are have a strong desire to get rid of the cc debt and not add to it here and there.

If you loose that desire, you will probably slide backwards into debt. You sound young and excited about being on your own. You should set a goal as to when you will have your debt payed.

I predict that eventually, you will ware down and decide to move, or maybe meet someone you trust as an roommate. The longer you stay in this condo, the longer you will have to deprive yourself of other wants. You remind me a lot of my oldest daughter.

I truly, wish you good luck.

[aida2003]

All I can say to help your situation is either to get a cheaper place to live by selling your condo or get a room-mate. Your mortgage + condo fee eats more than a half of your net monthly earnings.
Other than that you've got very little room to increase payments to pay down your CC debt unless..... you rent a car once every 3 months, stop going out with your co-workers, cut off the $15 'blow' money and your cable and cellphone. Maybe then you could pay CC debt off within 2 years...

Good luck

[jIM_Ohio]

Originally Posted by maat55

Eliminating 8400 in CC debt while having little wiggle room is going to be a long and difficult process.

The key things you have to do, are have a strong desire to get rid of the cc debt and not add to it here and there.

If you loose that desire, you will probably slide backwards into debt. You sound young and excited about being on your own. You should set a goal as to when you will have your debt payed.

I predict that eventually, you will ware down and decide to move, or maybe meet someone you trust as an roommate. The longer you stay in this condo, the longer you will have to deprive yourself of other wants. You remind me a lot of my oldest daughter.

I truly, wish you good luck.

OP has some liquid cash ($400/month) to throw at problem, and I hardly call 24 months of paying off debt to be "long and difficult".

[LivingAlmostLarge]

Second job again, I repeat. Single and young? Do it now while you still can and by the time you are done paying off the CC, your regular income will catch up.

Plus something you haven't considered maat for selling, in canada, they have less of a need for retirement and EF because of the socialized system.

They have RRSP but it's different. They get more from the government upon retirement and don't have to worry about medical expenses like we do.

I married a fellow canuck, and when we talk to his old buddies, no one worries about retirement and money. They get taxed heavily but it's comforting knowing they have a more secure retirement etc.

[DebbieL]

Well, as a Canadian let me tell you - we do have to worry about retirement savings - very much. The MAXIMUM monthly payment from our CPP (Canada Pension Plan) is currently in the $800/month range. That is only if you've earned enough money over your working years (contributed enough) to get that maximum. I think the average payout is currently $600 and something. We get old age pension that is $400 and something per month. The maximum amount a retired person (with no other savings) would be getting from our socialized system is around $1200-$1300 monthly (and that is only someone who had a decent working income for many years). That's peanuts in my city where the average cost of a house is currently over half a million. Rents are usually about $1000 or more for a 2 bedroom. Gas is $1.50/litre. Food is expensive up here too. I definitely wouldn't want to live in poverty, so I save for my retirement. The amount from the old age pensions will only cover about 1/3 (or less) of what I want for my retirement.

The one advantage we do have is the healthcare. I cannot deny that no Canadian ever has to worry about being homeless from a huge medical bill or something. It costs $54/month in my province for a single and $108 for a family.

PS - To the original poster - how on Earth do you keep food/drink/cleaning supplies to $125/month? Wow. Even when I was single, just for me and my daughter (who eats barely anything and often eats at my parents place anyways) was at least $300/month. Is Toronto that much cheaper for groceries than Victoria?

[zetta]

I second the roommate idea, just for a couple of years until your income gets ahead of the mortgage. If you could rent a room to someone for $400/mo your cc bill could get paid off very quickly.

[agatha1939]

Originally Posted by DebbieL

PS - To the original poster - how on Earth do you keep food/drink/cleaning supplies to $125/month? Wow. Even when I was single, just for me and my daughter (who eats barely anything and often eats at my parents place anyways) was at least $300/month. Is Toronto that much cheaper for groceries than Victoria?

I don't know, but this is the average I have been spending since January. I love cooking and I eat pretty healthy, no read meat at all (almost only fish), no processed food, no junk food either. I basically only buy veggies, fruits and eggs (weekly), plus pasta, flour and rice when I need (I go to Costco every other month). I also don't buy regular milk because it goes bad very fast, I have powder milk that will last me for maybe 6 months.

[agatha1939]

Originally Posted by zetta

I second the roommate idea, just for a couple of years until your income gets ahead of the mortgage. If you could rent a room to someone for $400/mo your cc bill could get paid off very quickly.

It does sound the best idea for me to have a roomate, I'll look into that... thanks!

[agatha1939]

Originally Posted by LivingAlmostLarge

Second job again, I repeat. Single and young? Do it now while you still can and by the time you are done paying off the CC, your regular income will catch up.

I called a temp agency today, maybe they can help me to find something at night, after my regular work... I don't mind working a 2nd job at all, but I would like to find something in an office, data entry, etc. Dealing with the public (restaurants, stores, etc) is so difficult sometimes...

[DebbieL]

Originally Posted by agatha1939

I don't know, but this is the average I have been spending since January. I love cooking and I eat pretty healthy, no read meat at all (almost only fish), no processed food, no junk food either. I basically only buy veggies, fruits and eggs (weekly), plus pasta, flour and rice when I need (I go to Costco every other month). I also don't buy regular milk because it goes bad very fast, I have powder milk that will last me for maybe 6 months.

I eat a very healthy diet (and my husband's a chef and we cook all the time). We don't eat much meat at all. I cannot come close to the figures that you have for groceries. I would love to have such low food costs!

[agatha1939]

Originally Posted by DebbieL

I eat a very healthy diet (and my husband's a chef and we cook all the time). We don't eat much meat at all. I cannot come close to the figures that you have for groceries. I would love to have such low food costs!

To tell you the truth I was budgeting $50/week for groceries but so far, that has been "too much". I do have lots of cleaning supplies from my last visit from Costco, so maybe when I have to buy more, my expenses will be bigger!

[LivingAlmostLarge]

Nah, I hear in Canada that they still have pensions at many companies, unlike the darn us. And yep you get about $1200/month without worrying about medical. Here the average is $1k/month from SS but you have to cover what medicare doesn't. So it doesn't go far.

Most of DH's friends who are in their 20s/30s in Canada have pensions. We don't. Lucky guys. Granted oil is a booming industry right now so I guess that's part of it.

So they get very generous pensions on top of not worrying about medical. In the US you get pensions only with government jobs and still have to worry about medical unless you are military.

Probably why DH is pushing for us to move to vancouver. It would be soo cheap! Food is cheaper, eating out is cheaper, taxes are about the same, and housing is cheaper except if we lived in Seattle. College is cheaper substantially too by a lot.