Budgets, Debt Management and Financial Planning for Women

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September 2014
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Previous Posts

  • Time to Add It Up – Did We Budget Enough for Our Trip?
  • Budgeting For Our First Big Trip
  • Radical Budget Cuts? Step 2: The Plan and Stakeholder Agreement
  • Radical Budget Cuts??
  • Summer Holiday Budget
  • Summer Birthdays
  • Making Friends With Your Banker
  • Summer Budget
  • Childcare Crunch! Is Your Budget Big Enough?
  • How to Get Rid of Your Mortgage ASAP :)
  • Time to Add It Up – Did We Budget Enough for Our Trip?

    Ok – here we go. Let’s look at the numbers.

     

     

    • $2,800 Flights
    • $245 Hotel
    • $344 Rental Vehicle + Gas
    • $360 Gifts
    • $100 Tourist Stuff
    • $325 Amusement Park
    • $500 Food, Drinks, Miscellaneous

     

    A Grand Total of $4,674!

     

    Ironically, my ball park estimate was the closest at $5,000 and funds saved and set aside (otherwise known as the plan or budget) was $4,000. The biggest difference between what we spent and planned was our flights. Not much we could do about those and we booked and paid for them far enough in advance that I knew our trip was likely to come in closer to $4,500.

    We were away for 10 days and fortunate to stay with family for the majority of the holiday which kept our accommodation costs low. The amusement park was an unplanned expenditure to celebrate a birthday and well worth the fun!

     

    All in all, I’d say a successfully budgeted trip. All the fun we had visiting family and friends can’t be measured by the dollars – a fantastic first family flight trip.

    Budgeting For Our First Big Trip

    We just got back from a two week to visit family in Ontario and the numbers are in! Did we do a good job budgeting and saving for our trip?

    The key is to plan well for a big vacation because once the flight has left the airport we are committed to the majority of the costs. There is very little discretionary spending and not many places to cut expenses. There were opportunities to economize but as a family of four, we don’t have a lot of flexibility in areas such as transportation and accommodation.

    Here’s what I budgeted:

    • I was hoping for $500 each flight ticket
    • $300 for 2 nights in a hotel
    • $300 for a rental car for a few days
    • $100 per day for food and incidentals

    Here’s how I budgeted:

    • A – I set a savings target of $3,000 for the big ticket items
    • B – I planned to use our regular monthly budget set aside for food, entertainment, gifts, travel and recreation for food and incidentals (approximately $1,000 for two weeks)
    • C – My ballpark trip estimate (without thinking too hard) was $5,000

    You may notice that A + B = $4,000 whereas C = $5,000. Compare these to the detailed trip budget of $3,600 ((4 * $500) + $300 + $300 + (11*$100)). The budget range was $3,600 to $5,000 which gave me a nice amount of wiggle room.

    We hit our savings target of $3,000 last year and I set aside a little each month for trips and weekends away. We bought our flight tickets in February and they were $700 each. I booked our hotel and rental car in July.

    Tune in next week to see what our vacation cost versus our budget.

    Radical Budget Cuts? Step 2: The Plan and Stakeholder Agreement

    Okay, after a small discussion and a little bit of negotiation I think we have a plan.

    We did it in 3 steps:

    1. Understand fixed expenses or savings that we can’t or don’t want to change.
    2. Review previous year expenses to understand where we’ve ignored our budget and seek out opportunities to cut spending.
    3. Set achievable targets.

    Here were the results:

    1. We are keeping our mortgage on an accelerated repayment along with our RESP and RSP savings and we can’t reduce child care, insurance expenses or utility bills.
    2. We absolutely must deal with our ‘going out for coffee and treats’ habit. It’s also time to reinstate some discipline with respect to ‘stuff’ and clothes.
    3. We’re going to stick to our budget on gifts, clothes, recreation and vacation and entertainment. No more coffees and/or treats out, nixing extravagant gifts to each other and no more ‘stuff’.

    This doesn’t mean that we won’t order in because let’s face it, we’re all tired at the end of the week and ordering in every couple weeks is a huge break. It doesn’t mean that our kids won’t play sports or go to birthday parties….they will. Some smarter grocery shopping may produce some savings too and every little bit will count.

    Now we’re on the same page!

    Radical Budget Cuts??

    My husband is proposing radical budget cuts and I do mean radical! He read an article about a couple that didn’t spend any money for 1 year other than rent, utilities and food. Their estimated spend avoidance was $36,000. A very tidy sum.

    You’d think being a financial blogger that I would happily jump on board but I haven’t. To say that I hesitate is putting it mildly…I don’t want to give up cable/internet, recreation or travel. I totally support restraint and frugality and willingly cut out treats (coffee out), adjust our menu, reduce meals out, slash the clothes and stuff spending, change our vacations to local car trip and family-stay-style but I don’t want to cancel Thanksgiving in the Okanagan with the family or miss out on playing soccer or field hockey this season (my knee has just been fixed!). We have two kids and they keep growing out of their clothes and want to play soccer.

    Rather than saying ‘no way’, I plan to look at our previous years’ spending to see where we have opportunities to ‘slash’ our budget without missing out on the things I think are important. Let’s see if I can put some game rules in play that will work for the household. We have a big trip to save for and this will be a great way to do it.

    Summer Holiday Budget

    I realize that I don’t always follow my own advice! What I budgeted for summer holidays and what we’ll spend are two different things…let’s see what the difference is.

    I budget $250 * 12 months = $3,000 which is a reasonable amount of money but it’s theoretically intended to cover the whole year. I think it’s enough to pay for a few weekend trips (including accommodation), summer holiday camping weeks and summer expenses such as child care camps, activities, special events and increased transportation/gas costs. I know I can do a better job making sure I include all the costs of summer holidays especially child care because now that they’re in school, the cost of full time care over the summer is a bit of a shock compared to before and after school care during the school year. Between camps, babysitters and special activities such as soccer camp and swim lessons, it adds up! What a fun summer though and isn’t that what it’s for?

    In reality $3,000 isn’t enough for various holidays over the year and larger trips out of province or country which require flights and hotels so my habit is to plan and save for these separately and that’s the difference between my holiday budget and our actual spending. I haven’t totally left it out…simply provided for it in a different place in my planning.

    Summer Birthdays

    Both of our girls are summer babies which means summer birthdays. I was always envious of my brother’s birthday in the summer because it meant fun presents like dingy boats, flippers and masks. Compared to a November birthday (mine) which is an ‘in between seasons’ birthday.

     

    Some moms seem to plan their childrens’ birthdays with such ease but I find it quite a challenge with a lot of moving parts such as cakes, goody bags, activities, food and drinks. Also, celebrations for family as well as kids mean several parties for the birthday girl.

     

    In many ways we keep it simple but with our guests in mind – especially since they’re 6 and 8 years old. Some old style games (6 year olds doing the egg and spoon race along with squirting a picture of Olaf is a lot of fun to watch), a basic menu of hot dogs and veggies and hanging out at a spray park in the summer sun. Luckily the weather has been great which makes the park venue an option because our home is smaller and an excited group of kids would quickly run out of space to  play. 

     

    Because it can be tricky to get good attendance at summer birthdays, we postpone our oldest’s party until the start of the school year. She’s old enough to understand that the wait is worth it.

     

    I realize that a big part of the girls’ fun is the planning. Who’s going to come, what will be in the goody bags and what will we do? Now they’re old enough to understand how all the bits and pieces fit together we can have the discussion about what’s reasonable to do for a party and what’s a little too much. We don’t dwell on the dollars but it’s a good opportunity for them to learn that the cupcakes we bought for the kids’ party cost a lot more than the cake we made for the family party….and they get to lick the spoon when we bake the family cake!

     

    Making Friends With Your Banker

    You may ask ‘What’s the point? I never go into my bank because I do everything online’. It would take a very long time to save enough cash to buy a car or a home and so when we do want to make a big purchase, most of us go to the bank and ask them to lend us the money.

     

    It may seem simple to us but banks look at our financial situation with a different lens basing their decision on our ability to repay the money consistently and without fuss. It’s our reliability that they’re most interested in.

     

    How to get in their good books:

     

    • Hold a steady job or a proven and reliable source of consistent income.
    • Build a positive credit rating – if your credit history shows you may your minimum payments on time, the bank is happy.
    • Grow a positive net worth – more assets than liabilities.
    • If it’s a big purchase, be prepared to put it up as collateral until the loan is repaid.

     

    Back to the original question….while the proof rests with the numbers, your banker will be happier to submit and support your application if you have established a positive financial profile.

     

    Here are some tips:

     

    • Choose your bank carefully and stick with it….holding an account for 10 years without a NSF (non-sufficient funds) cheque looks a lot better than opening the account 6 months ago.
    • Keep your credit shiny by making your payments on time and don’t hold or apply for excessive credit.
    • Be prepared to provide the information that your banker requests (pay stubs) – direct deposit pay doesn’t hurt either.

    Summer Budget

    Summer is here! The July long weekend is fast approaching and summer plans are well underway.

    Summer is loads of fun but the reality is that I don’t really look at our budget while we’re in busy enjoying ourselves. I make sure the bills get paid but that’s about it. Now that we have most of our plans set out, it’s time to check the cost of the fun against our budget L

    There are 3 elements to our summer budget:

    1. Regular Expenses – While you’re away, regular expenses don’t go away so it’s important to make sure the money is there to pay the bills.
    2. Vacation and Travel – I heard on the news this morning that Canadians plan to spend an average of $1,800 on summer travel – down from $2,400 last year. Gas has gone up and air travel is always more expensive over the summer months. Of course other vacation expenses to include are accommodation, transportation, meals, activities and incidentals.
    3. Additional Childcare – With school out early, many of us are already managing higher childcare expenses for June and summer camps all come with a cost. Be sure to factor this into your budget.

    Often the early bird gets the worm and booking ahead can save you some money but now that we’re close to the wire, last minute deals are popping up. Flexibility is the ticket!

    Childcare Crunch! Is Your Budget Big Enough?

    Organizing childcare is a challenge whether you’re returning to work or it’s school break. It’s one of the most important support systems if you’re a working parent but also one of the most difficult to get!

    Do you know how much childcare costs your family each year? I think we’d all be surprised when we look at the numbers. There are many configurations and certainly one size does not fit all!

    • Nanny
    • Group Child Care
    • Home-Based Child Care
    • Flexible Child Care (Patched together because your work schedule is part time, flexible or you have family who help out)

    Monthly care for full-time working parents ranges between $1,000 and $3,000 per child by the time you consider fees or wages (including deductions, benefits, vacation and pre-school).

    Add a layer of complexity when your children go to school to manage before and after school, Pro-D days, school breaks, summer and strikes. How do you do it and what it the cost? I always forget that winter, spring and summer breaks mean weeks of extra child care in the form of camps or other activities and at a few hundred a week, per child, it adds up quickly. A reasonable monthly budget number is $500 per child which may not seem too much except when you multiply it by the number of children you have and add it in to everything else to keep life ticking along.

    How to Get Rid of Your Mortgage ASAP :)

    No one said it’s going to be easy peasy lemon squeezy but if getting rid of your mortgage is number one priority for you, then it can be done.

     

    There are 2 strong motivating factors to pay off your mortgage as soon as possible:

     

     

    1. No more mortgage payments = more of your pay cheque is discretionary income.
    2. Paying down your debt faster = less interest paid to your creditor.

    The fact of the matter is that you owe a whack of money to your bank and it won’t magically disappear but most mortgages can be repaid faster by either increasing the payments or making lump sum payments. In either case, anything paid over and above the contracted payment, goes directly to pay down the principle owing. This means a lower amount to calculate interest on each month!

     

     

    Most of us receive little bits of money here and there and very often, it trickles in and it’s spent before we know it. Things like:

     

     

    • Tax refunds
    • Bonuses
    • A small raise
    • GST Refund
    • Universal Child Care Benefit
    • Expense reimbursements
    • Overtime
    • Extra income

    Put this money against your mortgage they can make a big impact. Save them up for a lump sum payment or increase your mortgage payment by your raise – either way, check out how you can make extra payments with your mortgage lender.

     

     

    You may say that your mortgage rate is really, really low and it’s true that if you have other debt with a higher interest rate, that should be your first target. Just think how great it would be to choose what to do with your mortgage payment each month!




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