Monthly Saving Report – August 2020

After doing last month’s saving report, I knew August was going to be a bad month for saving, so let’s just get it out of the way: this month, we saved $0. Yes, zero dollars. With a couple of large unbudgeted spends (new bikes, plus Invisalign payments) totalling $3,183 – which I then take out of the next month’s savings – it was always going to be difficult to save this month.

Between knowing it would be difficult to save anything, going on a 2-week vacation right at the start of the month, and feeling like a bit of refinement was due on our budgeting approach, I decided to not do a budget at all for August. It felt bizarre to have nothing planned for our income for the month, after a few years of trying to strategize every paycheque, but on reflection I think it was a good mental break for me, and take a few weeks off before going again in September. As it would turn out later in the month, we need to hit reset on our finances anyway, for all the right reasons! (more on that later..)

This did mean, however, that we put no money into:

• Either of our TFSAs (which we use to invest in ETFs)
• our Cash Savings
• our Emergency Fund
• our Vacation Fund
• my Capital Gains Tax Pot
• the “Big Purchase Pot” (although I would hope not, after the unplanned bikes purchase! This pot is going into hibernation for a while..)

Of course, this isn’t great, and feels like a setback. At first when I realized we wouldn’t be saving any money this month, it was a gutting feeling – we were on such a roll, and I thought we would be able to maintain it for the rest of 2020.

When I thought about it a bit more though, I realized that in reality, all it means is it that we have probably been overreaching with our monthly saving, putting more away than we realistically could. Of course, this could (and will be!) be rectified by better budgeting – understanding our regular outgoings and upcoming spending needs – but for now, I’m at peace with the fact that we have put more into savings than we realistically should have this year, and August is the month it evens itself out. Even so, we have had a great year of saving so far!

We Bought Our First Home!

I mentioned at the start of this post that we would have to revisit our finances regardless because of some good news… we bought our first home! This has been a major life goal of ours – as it is for most people – but we never thought it would happen for us in Vancouver, because of how insanely expensive real estate is here, or because we weren’t sure if we would move back to the UK in the near future, or because I would over-analyze the situation in spreadsheets until we were both dead!

In the end, COVID-19 made things simple for us: we aren’t going anywhere for the foreseeable future, we are lucky to live in a part of the world that is relatively unaffected, and the housing market has cooled a little, making things (slightly) more affordable. The whole thing happened very fast: after getting home from vacation I was bored, window-shopping on REW.ca. I found our apartment in North Vancouver – an area we’d never contemplated living before – that seemed good value for money in the area. We viewed it a day later on the Thursday, put an offer in on Friday, and had it accepted on Saturday morning. We even managed to take $14,000 off the asking price – down to $484,000 – something unthinkable in Vancouver over the past five years!

Revisiting Budgeting

Clearly, this means a change to our budgeting going forward. Up-to-now, we have just had to focus on paying fixed monthly outgoings, giving ourselves a living allowance, and then divvying up the remainder into long-term saving accounts (TFSAs, cash) and short-term saving accounts (cash for vacations, big purchases etc.), all while keeping an eye on our overall risk tolerance.

Now, we have a new class of asset (and debt) that we own: property (and, of course, a mortgage). We have put a significant portion of our long-term savings into a down payment, which of course means we now have less liquid assets available to us. Because we have never been sure about how long we would stay in Canada, and also because up-to-now we haven’t utilized our RRSPs as a retirement fund, our savings have always just been… savings. Yes, they are split out into different accounts and invested (either in ETFs via our TFSAs, or high-interest savings accounts), but we have never saved by ‘goal’, and our money has remained liquid.

As a result, we have never had a ‘down payment’ pot, aiming to reach a certain amount before starting our search. Instead, we have spent a lot of time analyzing our finances, and playing out mortgage scenarios over the past few years in spreadsheets to just ‘know’ when a good opportunity came around that we could afford.

That is what made us able to move so quickly when the apartment came up, but it also means we now have to revisit our budgeting, and start again from scratch with new goals, and with a mortgage in mind – that’s before even getting to budgeting for renovations, something Candy has been dreaming about her whole life!

Did It Make Sense To Buy?

While ultimately, a calculator doesn’t tell you everything when deciding whether it makes sense to buy a home or not, I’ve always wanted to make sure that it mostly made sense and that we weren’t making too much of an emotional decision.

The difference between our rent ($1,800) and mortgage + strata + property taxes (~$2,400) is about $600 a month, so this is automatically $7,200 less cash left each year to be saved after outgoings, although of a good chunk of that is going towards equity in our own home, and not into the pockets of a landlord!

We are also going to be better off each in that the cost of owning (mortgage interest + strata fees + property tax + estimated maintenance, ~$1,400) is less than the cost of renting ($1,800), so that is $400 back into our own pockets each month that was previously going to our landlord, never to be seen again.

Ultimately, yes, I think this did make financial sense for us to buy. While we will have $600 less cash a month in our bank account, we are not stretching ourselves financially with the mortgage, and will still have a healthy amount left to continue saving and investing. We are also clawing back $400 a month of previously ‘wasted’ outgoings, that we divert from rent into home equity.

What Next?

What this means for September, I’m not sure. In August, we bought a home, we emptied our vacation fund, and we saved nothing, so everything needs a hard reset. My gut feeling is that we are going to be so busy with house admin, that I am not going to have much time to dedicate to it – maybe September can be a month where I don’t budget strictly, and then do a painstakingly detailed review at the end of the month to see what comes out in the wash. After all, I did say hard reset.