How does my budget stack up to the guidelines?

Sometimes, I’m overwhelmingly aware of how little room I have in my budget.

Lots of experts have guidelines for which percentage of your budget should be allocated to certain expense categories.

If I were to compare my reality with Gail Vaz-Oxlade’s guideline, here’s how I stack up:

Gail’s “Life Pie”, as she calls it suggests the following guidelines:

35% housing (rent/mortgage, taxes, utilities, maintenance, and home insurance): Mine is 45%

15% transportation (car payment, insurance, gas, repairs, license, transit, cabs, highway tolls): Mine is 4%

15% debt repayment: Mine is between 10-15%, depending on the monthly cash flow

10% savings: Mine is actually 10%, but most of this is savings toward post-secondary (7%), the remainder is for emergency and retirement savings for me.

25% life (food, clothing, entertainment, charity, medical, animals): Mine is about 30%. My groceries are 9%, medical is about 9% but can change any time, phones (including cell)/internet/cable is 4%, life/disability insurance 5%, the rest is dining out, entertainment, stuff.

Yesterday, Jacq at Single Mom, Rich Mom proposed a guideline a different way:

50% fixed expenses (the stuff you can’t do much about): By her guideline, my fixed expenses are 71% (includes groceries, medical, housing, essential utilities like heat and hydro, water, garbage and transportation)

30% variable expenses: Mine is 4-6%

20% savings/debt repayment: Mine is 20-25%

Once I compared my spending to Jacq’s guideline, I gotta admit, I got a little depressed. This is why I’m a dull woman. Variable expenses of 4-6%? Something’s gotta give.

When the line of credit debt is retired, I’ll have another 10-15% in my budget to do other things with, like ramp up my retirement and emergency fund savings, but also to have a bit more fun money. The albatross in my budget is this place we call home. It’s expensive to live in the city. If I look at Gail’s guideline, when I link both housing and transportation together (her total is 50%), I’m actually in the right zone, although the higher end at 49%. As I said to Jacq yesterday, I’m not willing to make a housing change just because it’s difficult. If it’s impossible – I’ll make the change.

I also pay more in medical expenses than I think most people likely do. This isn’t a choice, this is a need. What I haven’t done is look into more drug coverage plans that I could take advantage of. I’ll put it on my to-do list. Meanwhile, if any of you know who would insure a type-1 , otherwise healthy, diabetic for a reasonable rate, I’m all ears.

Today, if I needed to replace a window in the house, I’d be using credit. If something happened to my income, we’d be in trouble. When I needed new black shoes two months ago, I had to do a lot of math to get them. (No, I don’t own 49 pairs of shoes – I really didn’t have a pair of black dressy shoes to wear to the part-time gig or elsewhere).

Honestly, I couldn’t live the way I’m living forever. It’s just too restrictive. I think I can live this way until the line of credit is retired, which should still be at the end of 2010 or January 2011 at the latest. So, instead of being depressed about it, I can give myself a bit of praise for what I have accomplished so far. I haven’t increased my debt this year, only reduced it. I’ve given myself enough wiggle room to start each month with what Jason at Canadian Savings would call last month’s money. For the most part, my spending has been controlled (save for a couple of lounge chairs).

The longer term forecast reminds me that the kids will probably be around another 5-6 years, then they’ll be off on their own. Buh bye medical bills. Hello lower grocery budget. See ya later post-secondary contributions. That might add up to 10-12K/year. I’m not trying to get rid of them, on the contrary, I love having the girls home. If life so far has taught me anything, it’s that stuff changes – OFTEN. The picture today won’t look quite the same next year, or in three years.

For now, I’ll remain terribly dull, but optimistic and dedicated. I’ll also try and not whine so much about it, and just dedicate myself to the plan.

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4 responses to this post.

  1. Thank you so much ……

    Reply

  2. Based on Gail’s Life Pie, we are doing good and all our expenses fall within Gail’s recommendations, plus we have a 6th portion of our life pie for a child support payment of 12% of net income.

    Based on Jacq’s guidelines, we are not doing as well… fixed 65%, variables 10%, savings and planned spending 25% (not even sure if planned spending should fall in the saving category but that’s the category we use for larger purchases like cars, appliances and big repairs for the house). I think in our case, because we have 3 kids in our home, plus one we pay child support for, plus a huge grocery bill each month, our fixed expenses are particularly high, compared to if we were just a couple with no dependents and a much lower grocery bill.

    I think the key is to look at your lifestyle and your specific needs, and use a variety of guidelines to check your plan. If YOUR fixed expenses are 71% but it works for you without leaving you racking up debt, feeling miserable or feeling deprived all the time, then it’s fine.

    Reply

  3. I think you guys are doing okay though. And Makky’s mom is right, if you feel like everything is under control, that’s all anyone can ask for. The reason why I personally like to have lower fixed expenses is if sh!t happens you can make up for it. Like my furnace blew this last Christmas (Christmas Eve at 1 a.m. yet!) By the time all was said and done, it was over $700 because we had -30C temps, just the firewood to keep the place vaguely warm (I didn’t have any stockpiled and couldn’t get someone to deliver over Christmas break) was $200, the furnace repair itself was about $500 – and then some increased electrical costs because I kept my oven going 24/7 and a space heater to boot. Years ago my furnace blew in another house and I couldn’t afford to fix it – my pipes froze. It wasn’t pretty.

    To a certain extent, things like grocery bills are partially variable too. If push comes to shove, we could all do a hillbilly housewife plan for maybe $80/month and live on gruel and toast. 🙂 Or Jacob at ERE’s lentils and rice plan (ick). IIRC, students at post secondary institutions get really good rates on medical insurance too, so maybe you can take advantage of that in a couple of years? Plus your girls are old enough to start working I think, at least over the summer? I know it was a help when my oldest son got his first summer job at 12 y.o. and could buy some of his own clothes and entertainment (he was big for his age and the guy that hired him for the summer thought he was 15 or so.)

    For me (and maybe this is just me) a higher fixed cost % left me with NO wiggle room back in the day,. So when something bad happened – and I must have had a big “kick me” sign on my back, it HAD to go on the card. With your debt going bye bye at the end of this year MCM, you’ll be fine. The end is so close to in sight, I bet you can almost taste it. I think you need a big “pat me” sign on your back and look forward to seeing what you do with that extra $$ every month!

    Reply

    • Thanks SO much to Jacq and Makky’s Mom. Last night I was talking with the girls about how we’re doing, which is actually pretty damned good.

      What I shared with them is a confession that I still get some buzz from a bit of retail therapy. Why do I think I want a new dress? I have a few nice dresses in the closet, and I have no plans to go anywhere fancy that would even suggest a need. It’s totally a perceived deprivation, not a real one.

      When I asked the girls if they felt deprived, they said “geeze, no!” They admitted when we buckled down in January (and I buckled down hard and fast) it was a bit of a culture shock. Now, they’re totally fine.

      The eldest is on the job hunt now, and the youngest makes a good bit of coin babysitting. Daughter number 1 MUST get work and MUST put money away for school, since she’s already had a College diploma paid for. The next 5-6 years at University will have an accumulation of debt, but it’ll be hers. Of course I’ll continue helping, and still support her at home. Daughter number two has almost 12K in RESP savings now, and that’ll be looking better in a year. I believe her father has some tucked away too, but I don’t have the details on how much. I’m less worried about her because we got smarter with the second kid.

      I actually don’t buy the kids anything, other than the essentials. If they need a new bra (need, not want) or undies or socks, I’m on the hook for that. Neither of them needs any clothing otherwise. I actually gave them both $60 in cash at the beginning of June because nobody’s had their hair cut professionally this year. If they blow it on clothes or whatever else, that’s up to them – but they know that’s their hair cut money and I won’t otherwise pay for another one for a while.

      I think that I just got a little whiney in June. I promise to quit now. I created my own reality, and I actually see a clear path out of it. The days just have to tick by, and I have to stay disciplined. What I loved about Jacq’s guideline is it truly illustrated to me why I was feeling deprived (even though I’m not). It also was a good, harsh reminder why the debt needs to go, so I can prepare to brace myself for emergencies. There’s a clear path for that too. I’m so damned lucky!

      Reply

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