Budgeting the Cost of Living

It’s incredible to really see how much you spend each day when you create a budget for yourself.

I have yet to set specific goals as I feel it’s a bit early still but I’m now closer to knowing how much money I spend on a daily, weekly and monthly basis. That’s the wonderful thing about math–you can break down the numbers as far down as you like. So now I know what my cost of living in Toronto is: roughly $88 per day.

How did I get that number? I tracked my spending for the last seven months, with January being the most accurate month thus far because I actually tracked it daily as opposed to going back into my bank statements and putting the money into different categories. I then divided my monthly spending by weeks and then the weeks by days to get that final number.

$88 doesn’t seem like a lot of money but it sure adds up. And you know what? That’s just a single female with no mortgage, children or car payments. I’m curious: how does my number stack up against other categories?

Turns out it’s kind of hard to get the daily number cost of living, probably because there are a lot of variables to consider. Here’s the facts:

Toronto is the second most expensive city in Canada to live in, according to Readers Digest. While I thought it was the most expensive, I was surprised to learn that Vancouver is in fact the leader in cost of living expenses in Canada. Expatistan, the “biggest free database of prices in the world” says Toronto is the 33rd most expensive city in the world. So globally Toronto is not the worst city to live in, but certainly not the cheapest either.

My average monthly expenses as of February 2014

Category Average Monthly Cost
Bank Fees $30.87
Bank Withdrawals/Unknown $323.02
Books $8.18
Business Expenses $23.50
Clothing $36.11
Credit Interest $106.45
Entertainment (Books, movies, crochet projects, etc.) $38.44
Food $411.18
Gifts (Christmas, birthdays, etc.) $26.04
Health/Beauty $91.56
Household $6.70
Hydro $44.55
Internet $30.18
Laundry $28.81
Life Insurance $80
Mail $0.69
OSAP $180
Rent $597.49
Savings $17.40
Transportation $158.64
Travel $113.70
VISA Debt Repayment $134
Wool $20.52

The numbers in red are the ones I’d like to bring down and the numbers in blue are what I’d like to bring up. Obviously, the savings and the debt repayment are the most important things I would like to focus my money towards.

The reason my health and beauty category is so high is because I take a medication that is pretty expensive and I don’t have health insurance. D’oh. I have options to reduce that cost this year, though. I’ve just been dragging my feet getting around to it. And my transportation costs will continue to go down as I no longer pay for a Metropass. Although we may be getting a car this year, so that number may indeed change drastically (along with all the other ones. Eek!)

I like looking at these numbers and I’d like to do it on a quarterly basis from now on to review how things have changed.

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The Psychology of Change

In a recent article in the Toronto Star, journalist Ian Harvey wrote about the reasons why diets don’t work: “The biggest barrier to success are psychological, and the patients who fail most often are those who aren’t ready to totally commit. Conversely, those who are either at crisis or have decided to change — whether it’s quitting smoking, exercising or dieting — will be more successful in making better choices.”

One has to commit to change in order for it to happen. It’s not something that happens overnight. It doesn’t even happen in a week’s time. You’ve got to really build upon small successes slowly but surely.

Trust me, this is me building myself up as much as it is a reminder for anyone else.

I’ve begun building my emergency fund with a dollar a day in the jar. So far so good. And my Spending Journal is being used. This journal will help me keep track of each dollar that I spend.

My next step is to begin making some small changes to how much I spend per week on various things and to increase my income. The biggest money pit for me is food. I spend a lot eating out. When I don’t care, I don’t care and I’ll spend without even thinking about it, to the point where the Popeye’s Chicken restaurant in my neighbourhood knows my order. That’s embarrassing and unhealthy for me. I shouldn’t be eating there so often.

But enough negative talk! This isn’t about what I should or shouldn’t be doing. Here’s what I did today that I’m proud of: I bloody well packed a lunch, got the coffee maker ready in the morning, brewed a pot while I was in the shower and didn’t almost leave the travel mug sitting on the kitchen counter. Okay, maybe I did. But I remembered it while I was in the elevator, so I wasn’t too put out by it. I had been distracted by my phone, which I was checking emails from on my way out the door. Note to self: next time, just wait. You don’t have to read them while you’re getting ready. I had received a rather chastising email from someone about a post I made on my reading blog and it was bothering me while I was getting ready, hence why I wasn’t fully mindful of the fact that I didn’t have everything in-hand. But, no matter, I got my coffee.

mary-brownsTonight, before I go to bed, I’ll make myself lunch again to take to work. It worked out really well today and I’m looking forward to eating food from home again. It was just enough to tide me over until we went out for supper this evening to Mary Brown’s. It’s not often we go to Mary Brown’s, but now that we have my mother’s car for the next couple of months we’re making a point to go occasionally because we love it so much. And because I hadn’t bought my lunch today I was doubly happy to get my Big Mary sandwich, relatively guilt-free.  (Still not the healthiest meal, you know?)

Anyway, I’m taking small steps. The Emergency Fund is coming along, $1 a day, and my expenses are down by at least $5 from a week ago. (I spend roughly $5-$10/day on lunch.) I’ll be interested to see when I tally up January’s funds to see how they compare to December’s. Will I inherently spend less now that I’m tracking my dimes and nickels (no more pennies in Canada!)? Or will my food budget be the same? I think it will take some time to see a difference because I’m now tracking all of my money, not just what I have in my bank account or on my VISA. The bank withdrawals category is a big ol’ I Don’t Know Where It Went since I haven’t kept track of my cash for the last six months. But that’s okay. We’ll see where it pans out.

In regards to my VISA, I’m also working on moving my balance to a lower interest rate card. I’ve requested an increase on the lower interest rate card so I can put the full amount onto it. I don’t know if I’ll get it, but it doesn’t hurt to try. Even if I can’t, I’ll save some money on interest by switching some of the balance over and paying the higher interest rate card off as quickly as I can.

What I need to prepare for is my student loans. I’m about to put that back into the budget because I can’t hold off on the payments any longer. I mean, I could try and ask fro repayment assistance again and I’d probably get it, but that’s the irresponsible thing to do. I need to pay these debts off once and for all. If I don’t it’s just going to continue sitting on my head like a dead weight, not contributing anything. Considering I can’t even tell you half of the courses I took in university any longer, I think it’s time I put this degree to bed and move onto the next phase of my life, right? Right.

Introduction

Solvent: Adjective; having assets in excess of liabilities; able to pay one’s debts.
Synonyms: financially sound, debt-free, in the black, in credit, creditworthy, solid, secure, profit-making;

What do I owe?

Student Loans:  $14,434.11
Interest Rate: 5.50%

My student loans have been stopped for about a year now as I transitioned myself into freelance work. I justified putting a stop to them instead of working them into the budget by thinking that I would eventually get them back into the mix. Thus far I have not done that and it’s been over a year since that happened. Instead of actively paying down my student loans during that time they have been sitting around doing nothing. I’ve avoided the National Student Loans Services so well that I don’t have my Username and Password for my account in a ready place for me to find it. For the purposes of this post I have now hunted down my username and password, and I’ve written it down on a piece of paper that will be filed away with the rest of my student loan files.

VISA: $8.025.34
Interest Rate (Purchases): 19.99%
Interest Rate (Cash Advances): 21.99%

This is the first month that my VISA has gone over its limit. When I did my six month evaluation of my budget, I realized that I’ve been spending roughly $1000 more than I’ve been making, so it’s not a surprise that my VISA has taken the brunt of that extra cash and now I’m up shit’s creek without a paddle. The main culprit of this is cash advances. While I’m fully aware that you should never take cash advances out because the interest rate is much higher AND it begins as soon as the cash advance is taken out, I have been using them anyway to cover my rent in case my pay cheque comes in late.

In the future, I would like to use a buffer of $1,000 in my bank account to do that instead. I’ve begun saving for this emergency fund with $1 a day. It’s not much, but it’s all I can afford right now.

My other goal is to eventually close this account and pay off my debts with my low-interest MBNA credit card. I have a card with a 6.99% interest rate. I will use that card to pay down my debts and once the VISA is completely wiped I will close the account because I do not need it. The MBNA card is with another bank and it has a much better interest rate. There is no reasonable excuse for holding a credit card with such a high interest rate when I have one with a better rate.

HBC Mastercard: $42.10
Interest Rate: ???

It’s not much. I don’t spend a lot on this card. Once, maybe twice a year. But I’ve missed one payment waiting for the money to come in and I know that it affects my credit rating. I have no reason to own this card other than the occasional trip to Hudson’s Bay Company. I convinced myself that it’s a good idea to get it one Christmas and I’ve held it for sometime without having any problems with it, but even $40 can cause a problem with your credit rating when you don’t pay it off right away.

Also, I’m aware that a department store card holds a much higher interest rate than a regular VISA or Mastercard. I’m unaware of the interest rate on this card. My online account does not say and when I tried calling to update my mailing address, which is missing the apartment number(!), I couldn’t get through to a human being and I lost my patience. The lack of an apartment number on my mailing address is the reason why I haven’t received my bill in the mail yet either. I was aware that the bill was missing, but it took me this long to track down the reason. Once I pay off this card I’m going to close the account and I won’t need to worry about it any longer.

Savings

Emergency Fund: $3

The goal is to build this to $1000 so I have a good buffer in my bank account for occasions such as the one I mentioned above.