I’m on my 5th month living in my own home and I think it’s worth taking a look at how much an average month costs me to carry my home plus survive.
It might be helpful to you if you’re wondering what a typical “homeowner’s spending” might look like. I’m sharing mine for reference especially if you’re looking to buy a single, detached home in Calgary.
This is my first go at experiencing what it’s like to live and budget as a homeowner having had no reference of what a typical homeowner spends on a monthly basis.
I pretty much just spent money on the bills that needed to be paid and bought as much groceries and supplies as two adults needed in a month (nothing too excessive I thought). Then from here, I hope to optimize my spending once I get a basic idea of how much this house costs me monthly.
My Average Monthly Expenses as a First Time Homeowner
I think I’m spending too much! I spend almost $4,000 monthly – given I haven’t finished paying off my student loans and I did include my savings goals in there (retirement, emergency fund, travel and my personal goal).
If you’re wondering why I included my savings goals as “spending” in my budget, it’s because I save over months before buying or paying for what I was saving for. Then when the month comes that I spend on that-thing-I-was-saving-for, I don’t include it in my budget because I’ve technically already paid for it over the previous months.
If you add up the mortgage, utilities, property tax and home insurance, the total comes out to $1,167/month per person. I live with my partner and we split joint expenses down the middle.
I think this amount is alright and works out to 29% of my after-tax income every month. If I was living in this house alone, it would eat up 58% of my income and that’s ‘no-bueno’!
There are ways we can lower this expense – by cutting back on utilities usage or shopping around for better home insurance or utility rates. However, the biggest thing that would make the most damage will be when it comes time to refinance my mortgage in 4 years. I could pay a lump sum and/or find a better mortgage deal… but for now, it’s pretty stagnant.
Other Joint Expenses
This includes our discretionary bills, groceries, restaurants, fast food, alcohol and auto and transportation costs. I think we’re not doing too badly here with how much we are spending per person – about $890/monthly (I honestly thought it would be worse!).
- Discretionary Bills (Life insurance, Cellphone, Netflix, Internet) = $94.01
- Food (Groceries, Restaurants, Fast Food, Alcohol) = $514.52
- Transportation (Insurance, gas, service & parts) = $282
This is my one and only debt left (besides the mortgage).
Since graduating in 2014, I managed to work down my $40k loan balance to $16k before buying the house. I was also aggressively paying this down before the house but now that has slowed down a lot. I’m only paying the minimum amount until I’ve addressed more pressing financial goals – like my emergency fund and my personal, selfish goal.
Oddly enough though, the more I see the “Student Loan” line on my budget, the more annoyed I get. It’s like it messes up the simplicity of my budgeting – instead of $700 towards my retirement, it’s $370 to my loans and the rest on my retirement! I’m most likely being just OCD but it might be enough that my student loans might be next on my hit list to pay off asap!
Related Post (on a more positive note!): Reasons I Am Grateful For My Student Loans
I have several savings goals squeaked into my monthly spending and I honestly wasn’t sure how I was able to free up some funds to put into these goals while I was shopping for house supplies and condiments.
I’m glad I was able to, however I also think that I could be more organized in how I tackle these goals. I feel like I’m putting little bits of cash here and there and making very slow progress on ALL of my savings goals.
I’m probably better off if I focused on one goal at a time. I’ll get there faster and I’ll feel less mentally cluttered and confused when I’m looking at my financial accounts wondering where I should put my money.
Update: I fixed this problem by sitting down and creating my financial trajectory for 2017 where I listed my money priorities in order! (and now going “balls to the wall” on each of them!)
This was a good exercise because it was a swift reality check! Gone are the days when I had plenty of disposable income while I was living with family. I now have to be more purposeful and intentional with the money I have. And have priorities!
From this exercise, I also concluded the following points:
- This house is unaffordable (as in my definition of “unaffordable”, not the bank’s) if I lived in it alone… unless I cut out most fun stuff and live less comfortably.
- My bare-bones budget to survive in this home (minus my savings goals and after I’ve paid off my student loans) is $2,500/month.
- Which means that a 6-month Emergency Fund equals $15,000 saved in the bank. (3 months = $7,500)
- I should pay off my student loan debt ASAP to free up that $370 I’m dishing out every month towards other goals (retirement perhaps). And make my budgeting simpler!
- After I’m (student loan) debt-free, I can live on only 62% of my income! Great news!
- Which means that a 40% savings rate isn’t out of my reach once I’ve dealt with my student loans and savings goals… while still supporting this house.
- That’s not even considering the income increases I should be able to make happen over the next years. *fingers crossed*
- And since I’m aiming for early retirement, using the 4% safe withdrawal rule and monthly spending of $2,500 (because I hope to goodness I will be rid of my student loan debt before I retire), I’ll need a nest egg of $750,000 to retire.
- And did I mention I should probably get rid of that student debt load asap?? My finances are just better that way!
This week, I challenge you to “check in” with your budget (or create one if you haven’t yet!).
Are you spending your money on things that matter to you or have you just been dishing out cash on auto-pilot?
Is your spending in line with your goals? If not, change it now!