Those of you that want to take control of your finances and starting living within your means, something like this would be a good place to start, ensuring that you have the fundamental building blocks covered. This plan draws in from many different aspects of popular financial plans. I’ll briefly explain this, and so you can modify this to your own income. This is based on a 2-income couple earning $5800 month. The first number to consider is taxes. Most people get taxes deducted at source, which is ideal. If you don’t have it deducted from source, put away tax money right away, so your bill every spring from the government doesn’t get too scary. This couple, after tax, brings home $5200 month. Going off the rule, don’t spend more than 25% of your income on your mortgage or rent (housing), they have $1458 for this monthly payment. Know that if this number is higher for you, you will have to sacrifice elsewhere, however you should strive to keep your housing in this 25% range. The biggest number in your budget/financial plan is the amount you will be living off of. This number for them: $2,088, should cover your cell phone bills, groceries, donations, entertainment, hydro and gas, entertainment, and so forth. If it’s easier to do a weekly number, this couple in question need to learn to live off about $500 each week.
This leads us to the next component which is ‘available funds for savings investment’ which is quite important to contribute to regularly. In this section we have $1654 available each month for savings and investing. Future income is important, and tax-wise is makes a lot of sense to max-out your RRSP, and so we are going to contribute $500 to each individual’s RRSP. This will create a nice refund back from your taxes, which you can use to upgrade your house or pay down your mortgage. This will also ensure you have your long-term savings covered. The next step would be to protect your current income through disability insurance — this you can only get while you have a job, however if you ever lose your job, as long as you keep this policy in place, will stay with you. The quotes will depend on age and lifestyle, however for a man around 30ish, I’ve put something in place for about $45.32. It’s important to consider critical illness insurance as well, which gives you a lump sum of money if diagnosed with a critical illness (like heart attach, cancer, stroke) and can pay for your health care pills, your bills while you are not working and so forth) and that is really it — as for the fundamentals, which really isn’ that hard!
This couple even has a surplus, meaning they can treat themselves to a romantic date night out at the end of the month, which is something to look forward to, to celebrate their frugalness and ability to rock it throughout the course of the month.
What is your financial plan like? How do your percentages differ?