The last two articles posted on ReconcileYourWallet worked through whether a person/couple should buy or rent a condominium in Vancouver, BC, Canada.
In the most recent of the two articles, I specified that a couple considering a $698,000 condo purchase, earn a gross combined income of $120,000. Their combined net income would be $8,149.17 per month.
After crunching WAY too many numbers, I was able to discern that maintaining the condo each month would cost the couple $3,371.89 (which includes: mortgage, strata, property tax, and insurance costs), leaving $4,777.28 for all their other life expenses.
After working through a mock budget, I do believe enough money exists to save for retirement and live comfortably with this income level. I don't believe, however, that many couples plan where to direct their income and would therefore feel 'tight' with their money.
This is assuming that many people don't operate in the confines of a budget and will repeatedly overspend - eliminating the potential impact of residual savings.
In the example to follow, $797.28 remains as savings after allocating money to the categories I believe to be reflective of many couples. I do believe the combined income of $120,000 is more than adequate with conscientious spending and budgeting.
But, have a look for yourself. What do you think has been under-budgeted or over-budgeted? What has been missed altogether? Do you think this could be an accurate picture of the expenditures of a young couple living in an metropolitan city?
The budget that follows is based on the assumption that each person has a car, has a cellphone, has cable, buys some new clothing, etc. I realize that this is a privileged life, but it's what I believe many younger couples believe/feel are minimum assumed costs. I think these things have been lost as 'extras' and more commonly thought of as basic living.
I'm not suggesting I agree with this line of thinking, I'm just suggesting that I think this is what many people think.
As you look at the budget below, remember that I haven't even accounted for what happens when a car needs replacing as the budget doesn't account for future car savings. In addition, part of the assumption is that neither party has an existing car payment, but I would imagine it would be more common/relevant to assume each person has a car payment.
The budget I drafted, also doesn't account for random wish list purchases like a new computer / bike / TV, etc.
I feel the truth to 'getting ahead' involves buckling down and reducing (or eliminating) that which we feel we're entitled to. That, or finding away to earn more money.
Since I'm a budgeting fanatic, below is a mock budget for this couple.
Side Note: If you haven't read one of my YNAB rants before, here goes: The best budgeting software EVER is YNAB (also known as YouNeedABudget.com). It's a serious financial game changer. You should check-it-out!
Again, a few assumptions are required to get started:
- Income tax has already been accounted for.
- Each person has a car and owns it outright (no car payments).
- They have medical services (MSP and extended health) covered by their employer.
- Neither person has a pensionable job - leaving retirement savings in their own hands.
- This number comes from an estimate based on my own household.
Eating Out / Dining $400
- This might be conservative too. Living downtown Vancouver would make it easy to be eating on the run frequently. This includes coffee shop visits in addition to restaurants etc.
Gym Membership $100
- I think it's common to pay for some kind of fitness pass.
- This offers each person $100 a month for clothing. This isn't to suggest that they spend this much each month, but suggesting that in the course of one year, each person might spend upwards of $1,200 in a year. Replacing running shoes, jackets, business wear, etc.
- Think basic household items: dish soap, sheets, towels, dishcloths, etc.
- When I lived in Vancouver for a short time, my bridge tolls equalled $175 per month. Since this 'couple' lives downtown perhaps bridge tolls will be less, but they'll likely face parking fees for most car-required errands.
NetFlix / Cable / Internet $200
- Netflix $9.99 / month, Internet $80 / month, cable $100
Cell Phone $180
- $90 for each person. Assuming data, text, talk, etc.
Haircut / Beauty $300
- might seem high, but think two haircuts per month, shampoo, razors, and any other beauty type services not listed here.
Gifts (Birthdays, etc) $150
- each month you probably have someone's birthday, anniversary, retirement, etc. in addition, you might need extra savings for the birthday gift you'll inevitably buy for your partner/spouse/etc.
Car Insurance $200
- assuming each insurance cost is approximately $1,200 per year / $2,400 for both.
Car Maintenance Savings $200
- this is an allowance for inevitable car repairs (oil change, new tires, unexpected breakdowns)
Home Maintenance Savings $200
- this is a savings account for big repairs. Major appliances, hot water tank, replacement of furnishings.
Fuel / Gas $300
- self explanatory.
- this is a rough cost for travel and accommodation for a potential holiday and costs to visit out-of-town family members. Of course, there is HUGE variation in this expenses depending on the individual/couple.
- future savings for the holiday season. Assuming parties and extra gifts(including wrapping and any shipping).
Retirement Savings Remaining $797.28
- Savings of $9,567.36 per year, assuming there is no overspending.