Monthly Saving Report – May 2020
With lockdown measures still in place, it has been a good opportunity to increase our monthly savings. I wouldn’t call that a good thing – I would much rather the world wasn’t at a standstill, and that families weren’t suffering so badly – but the silver lining is that it has reduced our outgoings significantly, and makes budgeting a lot easier.
Overall, we saved $4,609, which was 54.3% of our net income for the month, which was the highest ever.
Income
Our joint income after tax as a couple (an Executive Assistant and a Customer Success Manager) was $8,487. I choose not to list our separate salaries for work confidentiality reasons, but it’s important to understand for anybody reading to understand what we are working with.
Fixed Expenses
This was the month I finally did an audit of all the subscriptions we had and cut out anything we weren’t using. Gone are DAZN ($20/mth – at least while sports aren’t happening!), and Audible x2 ($15/mth each – as long as you use up your remaining credits – 7, in my case, you don’t lose them. So I just bought 7 books and cancelled it until I’ve listened to them all). That’s $50/mth, or $600 a year saved just in apps we aren’t even using!
| Rent (expensive in Vancouver!) | $1800 |
| Car insurance | $155 |
| 2x phone bills (minus $75 covered by work) | $70 |
| Hydro (12 month split payment) | $29 |
| Internet (so expensive in Canada!) | $101 |
| Netflix | $10 |
| Strava | $4 |
| Fender | $6 |
| Google One | $3 |
| Total | $2178 |
Living Allowance
This is always the most difficult part of the monthly budget – predicting how much you will need for living costs during the month. I still haven’t quite figured it out yet, and while COVID-19 has brought our living costs down – we’ve only filled up on gas once in 2 months! -, it also means I don’t truly know what our average monthly cost of living is (I have only been using the “pay yourself first” method properly since the February 2020, when the world started getting weird).
The idea is always that this amount should cover us, because anything left over after taking away fixed expenses and living allowance is money that goes straight into our various savings pots. If this number is off, things can get messy later in the month.
Some people are more strict with their approach – their living expense is set in stone on the 1st of the month, and if you run out, you’re eating spaghetti and rice until payday – but I like to be a bit more flexible. My approach is that I will stick to the living allowance as much as is physically possible, but if at the end of the month there were any un-budgeted spending, then that number comes off out of of the savings pot for next month. This “penalty” keeps me honest enough that I’ve always got one eye on these unaccounted-for spends during the month, as I hate getting to the next month and seeing a reduced savings pot!
So the formula ends up looking like this:
Savings for the current month = Income minus Fixed expenses minus Living allowance minus Un-budgeted spends from the previous month
To keep our living allowance separate from our main chequing account or from other credit cards, we use a prepaid Visa from Koho, topping it up each payday.
| First payday | $900 |
| Second payday | $800 |
| Total | $1,700 |
This could definitely be lower, but we’ve noticed to a degree that we’ve replaced some living costs with boredom spending, and also using the budget to buy little bits for the apartment that we moved into 6 months ago.
It’s not exact science, but it’s working for now! Once life is back to normal, I’m going to put more time into defining what this allowance should look like.
Which brings me onto…
Un-budgeted Spending
Last month, we spent $179 outside of our living allowance. (I have to admit, I messed this up and only added it up to the 15th April, so there’s some unaccounted for spending floating around on somewhere. I also actually forgot to subtract it from May’s monthly costs! I’m just going to pay the credit card bill and forget about it…)
This month, we spent $303, which is the lowest it has ever been since using this method of budgeting (it has been as high as $1,550, which is slightly embarrassing! 😳 ). This will come out of next month’s savings.
To be honest, this was spent on random shit like home gym equipment, takeouts, charity donations, even customs charges on one of the 50 billion packages that seemed to arrive at our door this month. I’m not sure how to account for it and I’m not anal enough to think about it too much.
Total Left To Be Saved
All of this means that for the month of May, after paying ourselves first (living allowance), and all of our fixed expenses, we had:
$8,847 – $2,178 – $1,700 – $179 (unbudgeted spend from the previous month) = $4,609
Splitting the Savings
A few months ago, I decided to split out our savings into individual pots for different goals. Before then, it basically all went into a joint savings account, and then I would deposit money from there into our TFSAs (which is made up of ETFs managed by a robo-advisor, Wealthsimple) at monthly-ish intervals, but definitely not with any strategy or consistency.
Now, it feels like we have a separate savings account for everything. It seems excessive, and takes a bit of management each month, but the peace of mind knowing what money is set aside for what goal/future spend is well worth it.
The pots we currently have are:
- Joint Savings
- TFSA (Johnny)
- TFSA (Candy)
- Vacation Fund
- Emergency Fund – we didn’t have separated from our savings until 3 months ago
- Big Purchase Pot – if we want something big, better save up!)
- Capital Gains Tax fund – I’m due to pay CGT on some sold company shares in 2021, and I’m trying to ease the blow come tax return time)
- Presents / Gifts Pot
I’m sure there could be more, and I’m not afraid to open more accounts!
My preference is to portion out the savings using percentages. I know some like to use absolute figures for some accounts, as it makes it easy to set-it-and-forget-it for investing (e.g. a fixed $500 a month into a TFSA every month), but I find it easier to use percentages and just spend 10 minutes each month doing all of the deposits manually.
It’s not an exact science, and I’ll make adjustments each month where I see fit if we see a few months into the future and realize priorities need to change. For this month, it looked like this:
| Joint Savings | 26% |
| TFSA (Johnny) | 24% |
| TFSA (Candy) | 24% |
| Emergency Fund | 5% |
| CGT Coverage | 2% |
| Big Purchase Pot | 5% |
| Vacation Fund | 10% |
| Presents | 4% |
| Total | 100% |
The first three pots make are the bulk of the savings and as a rule of thumb aren’t supposed to be touched until they are really needed i.e. for a house deposit, retirement, some investment opportunity. They make up 74% of the money saved.
The emergency fund is self-explanatory – it’s not to be touched unless we have some kind of emergency like losing our jobs, somebody gets sick etc. It’s small at the moment, so we’ll keep contributing for a few years until it’s large enough. I literally do not consider this to be our money when I look at our overall wealth. That’s 5%.
The 2% put away for a future Capital Gains Tax bill is in effect not my money.
The final three pots include money that we fully expect to spend this year. They are not long-term savings, but it feels good to be budgeting for these expenses properly – it allows us to better budget for the year, and understand how much is actually going into long-term saving goals (currently 74% – three months ago, I couldn’t have even hazarded a guess). These make up 19% of the month’s savings.
Summary
Our final savings for May 2020 are as follows:
| Long-term savings goals and investments | 74% | $3,411 |
| Emergency Fund | 5% | $230 |
| CGT Coverage | 2% | $92 |
| Budgeted spending pots | 19% | $876 |
| Total | 100% | $4,609 |
I hope this is useful for anybody looking to set up a personal budget of their own. I’m also learning and optimizing as I go… I’d love to hear your thoughts below on how I could improve on my own methods!
