One millennial's entirely half-baked
attempt to save half of her income.

It turns out, saving 50% is bigger than just one blog post. So here we are.

1
Exactly How To Handle Not Hitting Your Money Goals
2
How to Budget for Non-Monthly Expenses
3
How Much Do I Need to Save for a House Downpayment?
4
My Biggest Money Challenge? Not Knowing How To Start
5
Can I Afford The Average House in Ottawa?
6
In Defense of the Fun Budget

Exactly How To Handle Not Hitting Your Money Goals

Exactly how to handle not hitting your money goals - which let's be real, happens to the best of us! Four actionable steps to make sure you hit your savings, investing, earning and other goals next time.

It would be a magical world if you hit your money goals 100% of the time, with no roadblocks or hurdles along the way.

But if that was everyday real life? You probably wouldn’t be reading this blog, and let’s be real, you might be a robot sent from the future to show us how to be perfect with money.

Still here? Not a robot? Let’s continue.

As I told you last week, I won’t be hitting my 50% savings goal until October, thanks to how I’m handling some non-monthly expenses in the next few months. And in case you’re new here, it took me more than 5 months to even hit that 50% for the first time!

Let’s be serious, it’s a s-t-r-e-t-c-h goal.

Since I’m so very well practiced in terms of “not hitting your money goals,” I’ve also figured out a pretty bullet-proof system for handling it productively (instead of crawling into a cave, declaring the goal a failure and spending $600 on a pair of shoes because I DO WHAT I WANT, BUDGETS.)

Yeah, this system works way better than that.

It’s what I do every month when I don’t hit my 50% savings goal, and to be honest, it’s also what I do when I do hit that goal. It’ll help you learn what you can do if you’re not hitting your money goals, and build a plan to move forward with your goals – and your budget – intact.

Sorry, $600 pair of shoes, maybe next time.

Step 1. Review your spending.

In all honesty, spending is the biggest reason I haven’t hit my money goals in the past, and I would take a bet that it’s a big part of why you’re not hitting your money goals too.

I mean, it’s not like I was just too good at saving for one goal and that’s why I didn’t hit the other ones. (This is real life, remember.)

So when I realize I haven’t met my goal, I take a look back at my spending. For me, that means pulling up my handy tracking spreadsheet, but never fear – there’s a pretty easy way to do this even if you don’t write down every single purchase like I do.

Log in to your bank account and your credit cards, and grab your account history for the past month. You can either download it to an Excel spreadsheet or print it out, but you’ll want to be able to look at the full month in one place, and be able to make notes. This is, hands down, the biggest and best wake-up call about why you actually didn’t hit your goals.

It’s far too easy to forget how quickly small purchases add up over the month. Trust me, the fact that it took tracking my spending to realize that $20 at the farmer’s market every month was an extra $80 in our food budget still horrifies me.

Taking a look at your spending is basically guaranteed to come with a few wakeup calls.

Step 2. Check in with your values.

Before we even get into the actual money stuff, it’s really important to take stock of what you value.

This doesn’t have to be a huge, elaborate personal-development session either, where you nail down the exact top five things you value. Just take a minute or two and think about what is really important to you. I guarantee you know the answers – is it fitness? Family? Career? Growth? Learning? Friends? Fun? Adventure? Travel? Education?

Even just going through that list, I’m sure you had some yeses and some nos. No one can value everything!

Once you’ve got a good idea off the top of your head what your values are, take another look at your spending from the past month. Which items or experiences did you spend money on that are totally, 100% in line with your values? Which ones are unrelated – or even more importantly, which ones are totally against your values?

Because hey, it happens. I value health and fitness, but have been known to indulge in pub food. #balance

When you’re trying to figure out how to trim your spending to hit your money goals in the future, spending that doesn’t align with your values is a great place to start.

And you know what? Your money goals might be high up on the list of things that align with your values, too. If you value family, and are saving for a big family vacation or to expand your family (kids or dogs both count in my eyes) that should get a place on the priority list. (It might even help motivate you to hit that goal!)

Step 3. Ask yourself how much you enjoyed yourself.

Ok, this one is touchy-feely – yes, even more so than the values step. But hear me out.

Take a look at your spending, and ask yourself how each thing you spent money on made you feel.

Some of them will trigger awesome memories, like a dinner with your grandparents or food you bought for a picnic with friends. That’s awesome!

Others will fall more along the lines of “Oh right, I did buy that this month.”

If you’re trying to cut your spending while staying exactly as happy as you are right now? My suggestion is to keep spending on the things that you still remember, and that still make you happy, when you look back on them at the end of the month.

And start cutting out the “Oh right, that” items as much as you can (especially if they’re just recurring payments you don’t need anymore.)

Step 4. Make (realistic) plans to do better next time.

This is the part where we figure out how to hit that goal next time.

At this point, you know where your money went last month, you’ve figured out which spending to prioritize based on your values and how happy it made you, and now we get to look forward to see what that means for next month.

First things first, jot down a list of all the non-negotiable things you have coming up – like rent, insurance payments, cell phone bills and feeding yourself. (If you want an easy way to grab estimates for how much you should be spending, grab your copy of the One-Minute Budget.)

Then take a look at what you know will be happening in the next month, from irregular expenses to fun events you’d like to participate in – especially if those things fall in line with your values, or they’re things that have made you really happy in the past.

Then, check in with your goals.

Is this month looking like hitting that stretch goal is feasible? If yes, commit to it. The only months that I’ve managed to hit a 50% savings rate so far have been ones where I knew the goal was within reach, and reminded myself of that constantly – trust me, it really helps avoid impulse spending!

If it looks like the goal might not (or definitely won’t) happen? Don’t be discouraged. Instead, remind yourself how valuable the progress you can make is going to be. (In my case, this is a strongly-worded reminder to myself that 40% savings rates are still pretty great, Desirae.)

So no matter what your goal is – paying down debt, saving for a house, getting started with investing, increasing your savings rate, or another awesome money goal – don’t get too down on yourself if you miss it. Instead, use it as an opportunity to check in with your progress, make sure your spending is making your life great, and make a plan to get closer to it next time.

Have you ever missed a money goal? How did you handle it – and do you have any suggestions for other people who might be in the same boat?

PS. This is actually an expanded look at a framework I sent out to my email list a few weeks ago, but it was too good not to share. If you sign up now, you’ll get handy content like this once a week on Saturdays, plus the One-Minute Budget delivered as soon as you’re on the list!

How to Budget for Non-Monthly Expenses

How to budget for those non-monthly expenses that come up sometimes, like annual insurance payments, vacations and more - and how to make sure they don't sink your monthly budget! Plus, grab a free worksheet to make it super-simple.

I have a confession to make: I’m not going to save half of my income this month. Or any month until…. October.

OK, I still have hope for July, but that’s a big maybe.

How can I be so sure, months ahead of time, that I’m not going to hit my savings goals for most of the next few months?

The Dread Pirate Non-Monthly Expenses.

Call them planned spending, irregular expenses, whatever you want to call them, at the end of the day they’re big purchases that don’t happen every month. We’re talking everything from a big vacation to an annual insurance payment to Christmas gifts (because egad, the holiday spending struggle is real.)

I know my next few months are going to be super-spendy, because I’ve planned to knock out some major non-monthly expenses over the summer, from my annual hosting costs to a big vacation to out west for fun, meetups with other amazing bloggers and a family wedding. I’ve also got a certain dog’s annual insurance payment coming up in September, which brings us to October before the non-monthly expenses really die down.

Until Christmas, that is.

The nice thing, though, is that I’ve had a plan in place to cover these expenses all year – and there are some simple steps you can take to make sure these big one-time expenses are stress-free for you, too.

Want to follow along with the worksheet? Grab your copy!

budgeting-non-monthly-expenses-worksheet

Map out your big expenses

I didn’t go high-tech on this part: I literally wrote out the months of the year and put notes about big upcoming expenses beside each month. These are the things you know – roughly – are going to happen, and when.

As you go through the list, think about

  • Annual subscriptions
  • Annual or quarterly payments (insurance, etc.)
  • Vacations
  • Healthcare purchases (glasses, etc.)
  • Seasonal expenses (sports, team memberships, etc.)
  • Holidays (gifts, travel)
  • Dependent’s expenses (sure, I mean my expensive dog, but kids count too I guess)
  • Business expenses

For me, I came up with 10 big expenses, tied to 6 months in the year (there was a bit of overlap making for some spendy months, clearly.) If you want an easy way to map yours out, make sure to grab the worksheet and outline your year of expenses!

Estimate the costs

Once you have that list, you can estimate how much each thing is going to cost you. If you’ve bought this thing before, it’ll be an easy estimate – plan for what you spent last time, and you should be within the right ballpark.

If it’s something you haven’t done before, like a vacation or a new pet’s routine vet bill, you can still make an educated guess! Google how much other people have spent on similar things, and if it’s something that involves multiple expenses (I’m looking at you, vacation) spend a bit of time planning how much you’ll spend on each part of it.

Plan your monthly savings

Now that you have a ballpark number for each of your monthly expenses, you can work on a savings plan to tackle them, without totally destroying your monthly budget. I remember saving up for running gear when I was a new grad, because a $200 pair of running shoes would have absolutely sunk my monthly budget.

We’re all about not sinking budgets here, right? Right.

But first things first: take a look at your planned expenses. Are some of them expenses you could handle within your regular monthly budget, if you just adjusted a few things? Maybe it’s a wedding gift, but the wedding is in town, so your expenses are minimal and you can totally swing it, no extra savings required. Those ones, you have full permission to not worry about.

Let’s talk about the bigger ones though – the ones that would 100% sink your budget and have you on a steady diet of ramen noodles if you had to also feed yourself that month. (Yo, you need to feed yourself, and as delicious as ramen noodles can be, don’t do it!)

For those expenses, you need a plan. Take the estimated cost, and divide it by the number of months between right now and when that expense is going to show up in your spending. That’s your new monthly savings goal, to make sure that expense is 100% covered by the time it happens.

Once you’ve done that for every expense, you’ll have a ballpark idea of how much you need to put away each month between now and those expenses happening.

Pick a way to keep track of your savings for these expenses

I know some people have serious reservations about setting up multiple savings accounts, which I totally get (and will talk more about in another post, trust me.) On the other hand, just leaving these savings in your chequing account is a recipe for spending them on something else. So here are three options you can consider to help make sure you actually save the savings you’re earmarking for non-monthly expenses.

Create a separate savings account for each expense.

Putting aside any reservations about opening a zillion accounts, if you have a few big expenses on your list (like, less than 5) this could be a great strategy. You could name each account, too, to help you remember why you’re saving – it’s way more motivating than an account number, I swear.

I did this for my new-bed fund, since my god mattresses are pricey. I’ve been putting away a set amount every month into it, and when I’m ready to buy a bed, the money will be there waiting for me.

Create an account specifically for non-monthly expenses, and group them together.

If you have way too many expenses for them to each get their own accounts, consider separating your savings for these purposes into a dedicated account. That way they’re safe from any “Oops!” moments of overspending in your chequing account, and don’t get confused with your other goals (like your emergency fund goal!)

Also, if you’re on Team Don’t Want a Lot Of Accounts, you’re only adding one more savings account to your list. One is a totally manageable number, right?

Bump up your contributions to an existing account (that you don’t touch!)

Maybe it’s your emergency fund, or maybe it’s an existing vacation fund that you throw your gift-specific saving into as well, but either way, you bump up your contributions to this account to add in the savings for your planned expenses. 

While this isn’t necessarily my preferred approach, when I stopped to think about it I realized I do this too. I throw my dog’s annual insurance payment savings into his emergency fund account, because it makes sense to me to keep them together! So there you have it. Combining approaches is 100% allowed and might make perfect sense for you.

That’s really all there is to it – map out your non-monthly expenses for the year, build a savings plan to tackle them, and make sure you don’t spend the savings on something else! If you want a handy way to work through this and build your own plan, I’ve got you covered with a 5-page worksheet that will have you prepared to rock those expenses in no time.

budgeting-non-monthly-expenses-worksheet

I’d love to hear what other strategies you guys use to handle big, irregular expenses! Let me know in the comments, especially if you’ve figured out another amazing system to tackle them.

How Much Do I Need to Save for a House Downpayment?

how much do I need to save for a house downpayment

So, housing.

I’ll be the first to admit that it’s a totally personal, deeply contentious topic, especially for us millennials – and I’m just talking about outside of the Vancouver-and-Toronto insanity.

But I jumped right into the middle of it when I wrote about whether or not I can afford the average Ottawa house, with this line.

“Now, would I ever buy a house with only 5% down? Not a chance, but that’s an opinion for another post. ”

Well friends, this is that other post. Let’s talk down payments.

Why I Don’t Believe in Putting 5% Down

Two reasons: numbers and risk.

The first is the big one: numbers. If you’re putting down 5%, more than half of that money just vanishes thanks to the CMHC premiums you have to pay to protect them if you can’t handle your mortgage. Right now, that premium is 3.6% of your house’s value, so you’re left with 1.4% equity in your house.

Yikes.

That’s where the risk comes in. Every rent vs. buy calculator in the world will show you that the longer you stay in a house, the cheaper it gets, because your switching costs – everything from realtor fees to renting a moving truck to alllll the closing costs – are averaged out over a longer time period. If you’re paying those switching costs every two years? Not a good scene, and renting will be the better option, hands down.

What does this have to do with putting 5% down on a house? Well, you might not be planning to move in the next ten years, but if you do, you’ll be paying switching costs all over again – and people move for all sorts of unforeseeable reasons, like an amazing job opportunity or a less-amazing change in family situations.

If you do end up moving, and you started from 1.4% equity in your house, switching costs will eat a big chunk of that equity. It might not happen, and you might be in that house until a ripe old age, but like… it’s possible that you might have to move.

Don’t even get me started on the fact that house prices are bonkers right now, and if you have to move once they cool down a bit? Egad.

For someone who’s all “bring on the risk!” with my investments, I’m surprisingly conservative with my day-to-day money, and a house will always be the biggest chunk of that for me. The risk of putting down 5% is just a bit too high for my liking.

So if I’m so anti-5% downpayments, you might assume I’m going to patiently wait until I can afford to put down 20% on a house, right?

Wellll……

Why I’m OK with Under-20% Down Payments

The short answer? I’m only so patient, friends, and the down-payment sizes these days are nothing to sneeze at. If you saw my take on affording the average house in Ottawa, even a 5% downpayment on a $403,603 house will set you back $20,180.15.

The longer answer actually breaks down into two things, but yes, one of them really is that I’m just not that patient. I’ve been saving – pretty aggressively – for a house downpayment for about a year now, and if all goes as planned, we’re still two years away from buying a place.

By the time we buy a place, if all goes as planned, I’ll have been saving the equivalent of my rent payment for three whole years, and honestly, I’d rather just buy a place and funnel that savings into other goals already. I’m excited to use that money for other things, which yes, will include increased housing costs – but will also be used to bump up my retirement savings.

The second reason I’m not entirely opposed to putting down less than a 20% downpayment (if it’s an option, aka you’re not buying a million-dollar home) is closing costs. Ask anyone who has ever bought a house and they’ll tell you – the closing-cost struggle is real. This guy underestimated his closing costs by 50%, and that’s not an uncommon occurrence, no matter how prepared you are.

Never mind the non-closing-cost line items, like new furniture or appliances. I’ve seen some older-than-I-am washers and dryers at open houses, let’s just put it that way.

If we were in a position to juuuuust barely hit that 20% downpayment number, but it would seriously deplete all of our other savings accounts, would I pay the CMHC premiums in order to keep a solid cushion of savings in my account?

Heck. Yes.

Let’s say the CMHC premiums came to $5,000 that gets rolled into my mortgage. I’d rather pay off that $5,000 at the 2.34% interest rate that we’re averaging right now for mortgage payments, than to rack up the same amount of debt on a line of credit charging 6% interest because we had literally no emergency fund savings left and an emergency popped up.

Because hi, that is exactly when an emergency would actually happen, and you know it’s true. You know The Dog would totally eat a sock that afternoon.

My Goldilocks Downpayment Goal

Not too big, not too small – see? Goldilocks. (Yeah I think I’m super funny, OK?)

Once all is said and done, and if everything goes as planned, I’ll be looking at putting down between 10% and 15% on a house once I’m in a position to buy. That’ll mean I’ll be on the hook for some CMHC payments, yes, but they’ll be between 2.4% and 1.8%, depending on where I fall in that range.

If I do put down 10%, and pay the 2.4% premium, it leaves me with 7.6% equity in the house, which is way more palatable than 1.4%. If I hit the 15% number, I’ll be paying 1.8% to CMHC, leaving me with a cool 13.2% equity.

In an ideal world, yes, I’d aim for 20%, and if you can get there, go for it!

For the rest of us, my challenge to you is this: pretend like 10% is the minimum downpayment on any house, not just the minimum payment on the part of the house that’s above and beyond $500,000.

Unless you’re in Toronto or Vancouver, of course, because your markets terrify me and I’d never presume to know what it’s like to be trying to buy there right now. Sending hugs.

What do you think – would you put 5% down on a house? Are you way more patient than I am and are planning to save up the full 20% before diving in? I’d love to hear about it – especially if you’ve already bought a place!

 

My Biggest Money Challenge? Not Knowing How To Start

my-biggest-money-challenge

Listen: we all have money challenges.

Some of them are (relatively) easy to solve, but others are big and thorny and no fun at all.

My friend Andrew at Family Money Plan is running this interview series, where he interviews other bloggers, and one line of questioning in the interview really stuck with me. To paraphrase his awesome questions (and not give away any of the interview!) it boiled down to

“What was your biggest money challenge?”

Ooof. Am I allowed to answer with a year?

Because if yes, the year was 2012.

To totally date myself, that’s the year I graduated from university, and started working in the world on my fancy not very fancy new-grad salary.

That I had no idea how to manage.

I knew the basics, and it’s not like I went out and lifestyle-inflationed it up on a high-interest credit card. But I also didn’t realize that maybe my aggressive savings goals and inflexibility would put me in line for a world of stress as I tried to save 30% of that entry-level salary.

What do I mean by world of stress?

Oh boy, I’ve been meaning to tell this story for ages.

Once upon a time, it was 2012, and my mom graciously drove me to Ikea to pick out a new $49 desk for my fancy decidedly student-style apartment. We got the desk, had a great time and made it back to my apartment unscathed.

I pulled the desk – which, let’s be real, was not that big, there’s only so much $49 will buy you, even at Ikea – out of the car and made my way towards the apartment.

And then I tripped.

Because I was carrying this awkward box full of desk, I wiped right out, and my knees took a huge beating on the pavement. That wasn’t even the problem though.

I was wearing my only pair of nice jeans at the time. Now that?

That was a problem.

Such a problem, in fact, that I went straight into full money meltdown mode.

“I can’t AFFORD TO REPLACE THESE JEANS!”

My budget was so tight that the thought of replacing a $40 pair of jeans, after spending $49 on a new desk, was absolutely unthinkable. Meanwhile, yes, my retirement accounts and “emergency fund” savings were getting big chunks of my paycheque every two weeks.

So on “typical” measures of money management, I was killing it, right?

Um.

Crying over a $40 pair of jeans is nowhere in my definition of killing it.

With the benefit of hindsight (because isn’t that always the way?) I can see now that I could have been a little bit more relaxed, and acknowledged that maybe – just maybe! – the strident adherence to what I thought was “the best and only way to manage my money” wasn’t necessarily working for me.

I mean, my god, I cried over a $40 pair of jeans. I never want that for anyone.

When I look back on it, I think the root of of the issue, and my real biggest challenge, was that I had no real idea where and how to start being an Adult With Money.

I had great examples and teachers growing up about how to manage money, but I didn’t really know – like, on a detailed, step-by-step level – how to look at my monthly income and turn it into a reasonable, realistic plan for myself that didn’t leave me crying over a pair of pants.

I started Half Banked to chronicle the current phase I’m in with money, and my (yes, sometimes ridiculous) attempts to save half of my income. But the absolute best part of this whole experience, by a long shot, has been hearing from friends new and old that somehow, this little corner of the internet where I overshare about money has helped them in some way.

So I want to do more of that, and can I ask for a huge favour?

I need your help.

I’ve created a super-quick, 4.5 question survey to help me figure out how I can create more content that actually helps you with the biggest money challenges you’re having right now – even if it’s more “I want to buy a house someday” and less “I’m crying over a pair of pants.” To each their own, OK? We all have our stuff.

And I mean, how can I judge anyone after crying over some pants, right?

It’s totally, 100% anonymous, and after having the all-stars on my email list send me some answers this weekend, I can guarantee it takes an average of just under 2 minutes to fill out (ahem, and if you have 60 extra seconds, you can even create a budget with the One-Minute Budget. I’m all about efficiency guys.)

The survey is closed now, but a giant thank you to everyone who participated!

 

As if I wasn’t already honoured enough that you made your way here to read my ramblings about money on the internet, I am beyond grateful for the time each and every one of you took to fill out the survey. I seriously appreciate it, and I’m going to repay the favour by addressing as many of the survey answers as I can over the next however-long-it-takes!

I mean, given how much fun I’m having, we’ve got years of me oversharing about money on the internet ahead of us, friends.

There’s totally enough time to get through all of them.

If you’d rather share in the comments, I’d love to hear – what would you say the biggest money challenge is that you’re having right now? Or do you have any new-grad money stories to share? I’m fine being the only one who has cried over pants, but if you have other funny-in-retrospect stories, I’d love to hear them!

Can I Afford The Average House in Ottawa?

 

can-i-afford-the-average-house-in-ottawa

I have a house-hunting problem.

Even though The Boyfriend and I are years away from buying a place, I can’t seem to kick the weekly habit of checking out the new listings in our neighbourhood. I’ve even dragged him to some open houses in our price range, “just to see!”

Sometimes, as I scroll through the listings, I’ll be like “Hey, let’s just live here!” The listing on my screen is invariably a gorgeous, ridiculously expensive house that looks like something out of a movie, with marble counters and a three-car-garage and two acres of yard.

It’s a joke, because of course we can’t afford to spend $1,000,000 on a house.

That seems like a pretty reasonable statement – we can’t afford a million dollar house – because we’re two millennials who haven’t won the lottery. But it only seems reasonable because we live in Ottawa.

You’d be forgiven for forgetting that there are housing markets in Canada outside of Vancouver and Toronto, because they get all the press – and rightfully so, they are hideously expensive. Articles like this one from Rob Carrick feature couples who aren’t that different than The Boyfriend and me, and yet they’re looking at houses that are almost double our maximum budget, because Toronto.

Lowest Rates took a look at the hard numbers behind keeping the detached-housing dream alive in Toronto, and to an Ottawa resident who has the luxury of ignoring downpayment rule changes that impact houses priced over $500,000, it’s shocking.

The Detached Dream — GTA Edition by LowestRates.ca

The Detached Dream: GTA Edition

They reached out to me to see if I could share a bit of what this picture looks like in Ottawa, and again, as someone who has a serious MLS problem, I was all over it.

Especially because when I heard the average house price in Toronto might hit $1,000,000 in the not-too-distant future, I almost wept.

I did some digging, and according to the Ottawa Real Estate Board, the average residential house price in Ottawa as of May 2016 was $403,603 (that’s as opposed to condos, which rang in at an average price of $261,017.) I don’t know what that’ll be in a year, but I think we can all safely assume it won’t jump up to $1,000,000.

So I took a look at what that means for potentially buying a house in Ottawa, on some of the same variables that Lowest Rates looked at for Toronto.

Minimum Downpayment

If I was going to buy an average house in Ottawa, I’d be dodging all the new down payment rules, because I’d be buying a house that’s under $500,000. I would only have to put 5% down, which on a $403,603 house, is $20,180.15.

Now, would I ever buy a house with only 5% down? Not a chance, but that’s an opinion for another post. For now, let’s just assume we stick with the minimum, and do math things from there.

Closing Costs

Closing costs in Ottawa are a bit different too, because we don’t have Toronto’s municipal land transfer tax to worry about. That said, we’ve still got a fair amount of closing costs to budget for: provincial land transfer tax, CMHC insurance, admin costs and life-happens moving costs.

Provincial land transfer tax: $4,547.06
Pretty simple: if you’re in Ontario, you have to pay land transfer taxes. You can calculate what they would be here.

CMHC insurance: $13,803.19
This.

This is why I don’t think you should only put down 5% on a house. If you put down $20,180.15, and then you get charged an extra $13,805.19, you effectively have $6,374.96 in equity on your house – that’s 1.6% of the original purchase price.

But again – that’s a rant for another post. This is not the end of my opinions about 5% down payments. You can calculate potential CMHC premiums here.

Admin costs: $2,000
This is everything from home inspections to lawyer’s fees, and yes, they come up. Budget accordingly!

Life-happens moving costs: $3,000
Maybe it’s a new couch, maybe it’s paint to freshen up the house, maybe it’s lawn care equipment, but I’m just going to put it out there: I’m factoring this into my budget for a new house. I have no illusions that I’ll be able to move and not find some kind of unavoidable purchases involved (especially the paint thing. I am all about fresh paint to make a space feel like home.)

Mortgage Rates

As much as I am not about that squeezing-things-into-your-monthly-budget life, mortgage rates have one of the biggest impacts on whether or not you can afford your house, because they directly impact your monthly payment.

If you’re buying today, you’re basically winning the mortgage-rate lottery, because rates are low af. That said, they will go up again someday (probably) so let’s take a look at what your monthly payment would be on the average Ottawa house using a few different rates.

  • The average 5-year fixed rate from LowestRates.ca is 2.34%, which on that average Ottawa house with a 5% downpayment, gives you a $1,748 monthly payment.
  • Keeping everything constant, but using the average rate from 2014, which was 2.97%, you’d be looking at $1,874 each month – a $126 difference.

It just goes to show you that what seems like a fairly minor difference can make a big impact on your monthly budget, which is why you should always compare rates. It’s not the only thing that matters when choosing a mortgage, but it’s definitely worth knowing your options.

That $126 difference? Yeah, it’s $7,560 over a 5-year mortgage term.

Yikes.

So… Can I Afford The Average House in Ottawa?

The general rule of thumb I like to use for “is this housing situation affordable” is whether I can cover all my housing expenses on 30% of my take-home pay (you can check what that is for you using the One-Minute Budget, in – obviously – less than 60 seconds.)

The CMHC guidelines give you a bit more wiggle room, recommending your housing costs ring in at no more than 32% of your gross income, and to calculate that, they add up your principal and interest payments (i.e. your mortgage payment), your property taxes and your heating bill.

For this average house in Ottawa, here’s what that number looks like annually.

Mortgage payments: $20,976

Property Tax: $4,036.03 (1% of purchase price, approximately)

Heating: $1800 (going with Lowest Rates’ estimate, because ¯\_(ツ)_/¯)

You’d ring in at $26,812.03 in annual house costs, which using the CMHC affordability guidelines means you’d need an annual income of $116,000 to handle the housing payment.

And even though I’m conservative like nobody’s business when it comes to affordability, my 30% of take-home pay rule only puts you at about $126,000 a year, pre-tax. (Although OK, fair, that is a $10K difference and nothing to sneeze at.)

At the end of the day, the question Lowest Rates posed in the infographic was whether or not the dream of a detached home is still within reach. In Toronto – especially if prices top $1,000,000 and trigger a 20% downpayment – it’s a little iffy, but in Ottawa?

I’m going to say it’s more doable.

But like, please don’t come drive up the Ottawa prices all at once, OK Toronto? We don’t have a basketball team, and it’s very cold here, I swear. You wouldn’t like it.

I’d love to hear from other people on this one, Ottawa or not! Do you think homes in your area are affordable? How did you figure out how much house you could afford?

This post was a collaboration between me and Lowest Rates, but as usual – and obviously from the ridiculous stories – all opinions are mine!

In Defense of the Fun Budget

in-defence-of-the-fun-budget

There’s this thing that happens when people find out I blog about money.

It goes something like this.

“Oh my god, I’m so bad at money – I spend so much on _______.”

That blank can be a lot of things, from craft beer to restaurants to clothes to a dog (ahem, hi. Me and my bonkers-expensive dog will just stay quiet on this one.) No matter what that blank is, there’s one constant: it is always, invariably, something that person really likes having in their life.

Maybe even loves.

So they spend money on it, and then they hear personal finance blog and the Guilt Monster pops up with a reminder that

“Oh my god, you spent money on a thing you like. That’s bad, and you should feel bad about it.”

And all I want to do is punch that Guilt Monster right in the face. Because, shocking personal finance truth:

You can be great with money and still spend money on things that make you happy.

In fact, if you’re not spending anything at all on things that make you happy, I’d argue that you aren’t doing money right in the first place.

Here’s exactly how you can keep spending money on things you love, and be a money rockstar at the same time: set a fun budget. Put aside a specific amount of money in your monthly plan, every month, that you get to spend on whatever you want, guilt-free.

Man, that was easy, eh?

If you want a quick guideline on how much you should be putting into your fun budget every month, check out the One-Minute Budget – all you need to do is put in the number on your paycheque, and it’ll give you a rough idea of how much fun money you can spend every month. (Seriously, it’s that easy.)

It’s that easy, and it’s also that worth it, because here’s just some of the benefits I’ve experienced now that I have a fun budget baked into my monthly spending.

You Know How Much You Can Spend On _______ Every Month

Whatever your blank is, you’ve now got a clear guideline on how much you can spend on it.

Maybe it’s computers, and your budget will allow for a new game every month, but not necessarily a new computer. Maybe it’s shoes, and you can buy a nice new pair of shoes once a month, but not a new pair of Louboutins (because omg that’s not a pair of shoes, it’s a mortgage payment.)

It doesn’t matter what it is, because in every single category of things that people like, there are really bonkers expensive options, and then there are options that you can enjoy every month. Your fun budget helps you figure out which ones are which.

You Can Find Ways To Enjoy Things Strategically

I love books. Like, l-o-v-e them. Do I still read them? All the time. Do I still budget $50 a month to buy new books from Amazon? Nope.

I realized that my enjoyment of books is exactly the same whether I own them or not, and that the library is a readily available source of free books. That one decision gives me an extra $50 every month to spend on date night or new clothes or patio beers with friends – all things that are much harder to get for free.

I might be cute, but I’m not get-drinks-for-free cute.

You Get a Clear Picture of Your Priorities

When you have a set amount of fun money, yes, you will have to make some choices during the month if you’re going to stay within that budget. You can have the restaurant meals, guilt-free, but maybe you can’t also have the subscription box or the stack of new books or the mini-vacation.

As you make those decisions, you’ll be more and more aware of how much you’re really enjoying the things you’re buying, if only because you know you could be buying something else with the money. You can’t help but notice which types of spending add the most happiness to your life when you’re aware of it, and you’ll start to prioritize those things.

In that way, literally, a fun budget will increase your overall happiness.

You Can Banish the Guilt Monster

If you’re on my email list, you’ve heard this already, but I bought An Expensive Thing last week: a day planner that retails for $75. Before tax. (That’s it in the post photo – isn’t it fancy?!)

That’s crazy, right? I’m a personal finance blogger and I spent $75 + tax on something I 100% do not need. But – and this is the beauty of the fun budget – I wanted it.

I had been using that day planner’s free printables to keep myself organized, and they had a huge impact on how I thought about my day and how productive I’ve been. So I wanted to buy the full version when it came out – and I did.

Guilt-free, because I scaled a little bit back on other fun spending this month.

That’s the real key to balancing “being awesome at money” and “spending on the things you love.”

When you set a fun budget as part of your monthly spending, you’re giving yourself permission to do whatever you want with that money – but only that money. You’re balancing your wants with your needs and your long term goals, because you’re taking care of those in other parts of your budget.

This strategy is also the only way to consistently hit your goals month after month, by the way, because trying to cut everything fun out of your life is a recipe for budget disaster.

It’d be like telling yourself you can never eat carbs again. You might do really well for two months, but month three? Let’s just say you might find yourself staring down the biggest bowl of pasta anyone’s ever seen.

I speak from personal experience here.

So seriously, friends: please give yourself a fun budget, and enjoy the hell out of every dollar in it. Stop feeling so guilty for spending that makes your life great. If it’s not compromising your money goals and your ability to take care of your needs, it’s actually one of the best things you can do with your money.

Do you set aside a specific amount of guilt-free spending money every month? Have you experienced any of the same benefits I have because of it – or additional ones I forgot to include? Let me know in the comments!

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