How to control your monthly expenses and keep tabs on your money
Keeping tabs on the amount of money you spend every month requires more than budgeting and keeping records of your expenditure. While it is important to monitor what you spend money on, you also need to go the extra mile and determine what goes in each category, such as transportation, home bills, food, and groceries.
The numbers for these may change every month according to how your needs change or your family grows, but the information below can still be helpful. It is also based on the average Canadian salary, so it may differ depending on your location. The salary used as reference here is approximately $986 per week and $51,000 per year.
The common categories of expenses
There are four main expenditure categories, and they have subcategories. Most experts agree on the level of spending indicated below.
The average housing cost per month is $1,100, which means it takes the biggest chunk of the income. It translates to 35% and covers everything, including mortgages, insurance, property taxes, and other related bills. That percentage may be higher in some cities, depending on the cost of living. Some measures like getting a roommate, renting a portion of the house, or using the property as Airbnb can help offset some of the bills.
This takes approximately 15% of the income, which is equivalent to $400 per month. Groceries and other household items like cleaning products also fall in this category. The cost can be lower, depending on where the products are bought and the brand quality.
The transportation cost in Canada is the same as food expenditure at 15%. It includes vehicle insurance, fuel, parking, car maintenance, and other related payments. The average is slightly higher at $470, but it can also be reduced by adopting habits like carpooling or using public transportation, which may be cheaper.
At least 10% of the average expenses usually go into paying utility bills. Most Canadians pay $315 every month for phone payments, electricity, cable, and internet bills.
In most cases, loan repayment takes as much money as other utilities. The total amount spent on settling student loans, car loans, credit cards, lines of credit and payday loans should not increase the monthly expense to more than $315 every month.
5% of the money can go into discretionary items like grooming services. Entertainment and gaming also belong to this category.
Putting some money aside regardless of how little you earn is a good habit. Most Canadians save at least $160, which is equivalent to 5%, but it can be more depending on your earnings. Savings can be divided into long-term, for emergency purposes, and short-term, for things like purchasing new gadgets or going on trips. If the income is not sufficient for both types of savings, the long-term can be a priority, especially when there are also debts being paid.
Savings will prevent the acquisition of other loans when an urgent or unexpected need arises. As such, you should never ignore loan repayment for short-term savings or luxurious items.
Clothing is of the basic needs that take approximately 2.5% or $80 of a Canadian’s income each month. The low percentage is mostly attributed to most people not having enough time to go shopping.
The healthcare system in Canada is better than in most parts of the world, which is a good thing when it comes to budgeting for medical expenses. The only services people cater to are dental, specialized treatment or physiotherapy, and purchases of contact lenses or glasses. Most people spend $80 or 2.5% per month on medical products and services.
The categories most associated with debt
Some of the categories above can take up a larger portion of the budget, thereby causing more debt than others. For instance, if someone does not travel to work daily, they use less money on transportation, but they may spend more on housing. Below are some of the areas you are likely to spend too much on, together with suggestions on how to reduce your budget.
Most Canadians like dining out, which consumes a lot of money. A good portion of food expenses is typically spent on grocery shopping. It can quickly accumulate to thousands of dollars every year, as shown by a 2017 survey, which indicated the average annual food expenses as $8,500.
That number can be reduced through several measures, such as using coupons, buying discounted food items or seasonal ones, using apps that offer cashback during shopping, and buying less pre-packed food products.
Examples of this category are gym memberships, entertainment, and grooming. One way to reduce them is by considering indoor entertainment instead of going out all the time. Cheaper or free activities that still allow you to exercise, such as hiking, biking, or working out at home, can also help save the gym membership funds. You can also try healthier habits like not smoking or drinking.
These are the normal utility expenses like water and electricity bills. Like others, they are also reduceable with the correct tips. For instance, using a dishwasher and washing machine after 7 pm during weekdays or waiting for weekends can reduce the consumption rate. Adjusting the thermostat accordingly, especially when you are at work or running errands can also reduce energy bills. Proper insulation measures like weatherstripping doors, caulking windows, and adding another insulation layer in the attic can also reduce heating and air conditioning use.
Most people in Canada only wear 20% of the clothes they have in the wardrobe, making this category the easiest to save on. Instead of spending $80 every month on clothes you will not wear regularly, use half the money to buy fewer clothes. Alternatively, purchasing at thrift shops or buying slightly used clothes online can also reduce that budget. Special clothing that is worn once or twice a year, like at a wedding, can also be bought second-hand.
This category costs at least $180 every month. It is possible to negotiate for a lower rate or go for a cheaper subscription. Alternatively, instead of buying brand new phones, you can buy gently used ones. Reducing internet costs by using free Wi-Fi whenever possible is another great idea.
The information above helps you know what you should be spending to gain better control of your finances. However, if you are still struggling to manage your finances, YorkCredit can come to your aid by giving you the best practical advice. Contact us for tips on how to budget efficiently.