I’ve Never Had A Budget

I have a confession to make. I’ve never, ever had a budget in my entire life.  I consider myself pretty good with money1 and I’ve never in my life been in consumer debt2 and I can count the number of times I haven’t paid off my credit card bill in full at the end of a month on one hand3.  I guess part of the reason I’ve never had a budget is because I spent so many years as a student on a very minimal amount of money, so I developed a knack for spending very, very little money at all times.  Basically my financial plan consists of:

  • automatic payments for my student loan & car loan
  • automatic contributions to my RRSP and 40th birthday savings account
  • pay my bills when they arrive
  • stick a chunk of money into a Tax-Free Savings Account every year4
  • buy everything on the cheap5

However, I think I’d really like to have a more of a, well, more of a planned plan.  I’d like to pay off my student loans a little faster and save a little more in my RRSP.  So I’ve decided that I really should crunch my numbers and see how much more I can put on my student loans each month and how much more I can invest in my RRSP.  My friend Kim has given me a spreadsheet she uses to plan and track her monthly budget and Sarah has given me a spreadsheet for tracking net worth6.  I also use Wesabe to track my spending, but haven’t yet had the time to sit down and look at the numbers7. So that’s my next little project8 – I’ll let you know how it goes.

  1. My mom is a banker and she and my dad taught my sister and me the importance of saving money and suchlike from the time we were very little. []
  2. unless you count my car, although I have the money to pay off that loan outright if I needed to – I just didn’t want to wipe out my *entire* savings to get the car []
  3. 1 – One Christmas when I was in undergrad, I was out of my first term student loan money and the paycheque from my job as a tutor bounced, but I didn’t want to worry my family and I knew I would get my next installment of student loans in January, so I put Christmas presents on my credit card and had to just pay the minimum amount for a month while I waited for that next student loan installment and for the tutoring company to get me my paycheque.  2 – Twice I’ve lost track of the date and forgot to pay my credit card bill by the due date []
  4. TFSAs are a new thing that started last year and so far I’m using it as place to hold my emergency savings. For the past two years, ING Direct has allowed you to put $5000 in an account in October that will become a TFSA on January 1 and they pay you double interest for Oct-Dec.  So I’ve done that the past two years – I think I make an extra $10 or something by doing it []
  5. I buy 90% of my clothes at thrift stores – you can get really nice stuff at thrift stores around here! []
  6. I heart spreadsheets []
  7. plus, it’s not quite up-to-date []
  8. as soon as I finishing marking papers for the class I’m teaching this term []

Comments |11|

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  • I haven't followed a budget for a while… but when I had one, I did it in Quicken. I would never want to put my financial details on a 3rd party website. And I say that as someone who has no problem buying things online by giving 3rd party websites his credit card numbers. But consolidating all my financial info over the web on someone else's servers? Nopers!

    I would actually advise financial software over simple Excel sheets, I think. It just seems like you can only get so far with Excel. Or that too much manual stuff would need to be transferred between sheets/XLS files. But maybe I'm crazy and Excel is more than powerful enough. I just find Quicken really useful in that respect, and I'm using a version that's probably 10 years old now.

    So wait a sec: ING is doing the TFSA thing THIS YEAR too? Why haven't I heard about that? And why are they doing it, even, given that last year it was a special promo leading up to their launch?

    I don't quite trust TFSAs, in that there are weird restrictions on them in that if you withdraw, you lose the contribution room or something. Plus, they come from Harper, so they must immediately be suspect. Why not just expand RRSPs? I mean I guess you lose the RRSP contribution room too but I think TFSAs are being touted as more short term investment vehicles (to make them seem different from RRSPs) but if you permanently lose their "room" when you withdraw, then they are not really short- or even mid-term investment vehicles and are like RRSPs Lite. They don't seem like the optimal choice for "emergency" savings because if you need to dip into that emergency fund, you'll be killing your TFSA room. Moreover, there are ways of withdrawing from RRSPs that don't eat up your contribution room (lifelong learning plan, and the first-time homebuyers plan) that TFSAs don't give you. So you might be better just regular investing and taking the tax loss, at least for funds it's conceivable you might need before you retire.

    I can't BELIEVE you don't own your car outright! That's so outrageous! 😛 Seriously, I think some consumer debt is okay, especially for big ticket items like that. Provided people understand that they're paying for the privilege and have the money to handle that extra amount. It's scary how many people don't know how much money they've spent at the end of the month, or how much debt they have in total. It's also pretty disgusting how businesses and financial institutions encourage that kind of ignorance. I mean until just recently, I had a credit card (as in, one of many) with a $20,000 limit–and I haven't had a full-time job for over two years. Can you imagine if I'd used even HALF of that?

    That's the biggest problem right there: people think that the credit room they have is money they actually have. If you use your credit cards primarily as charge cards that have to be paid off every month, your financial situation improves pretty considerably.


  • Reply

  • @Kalev – You don't lose your contribution room if you take money out of a TFSA. And since RRSPs only let you take the money out for specific reasons (like you said, buying a home in Canada or going back to school), I figure RRSPs are not a good place to keep my emergency funds (where emergency = I lose my job and need it to live, not "I want to buy a house").

    I know what you mean about people who don't know how much money they've spent each money or how much debt they have. Have you seen "'Til Debt Do Us Part"? The people on there spend 2 or 3 times what they make and often 2 or 3 times more than they thought they were spending!

    Re: "It's also pretty disgusting how businesses and financial institutions encourage that kind of ignorance" – that's why I HATE the Scotiabank tagline "You're richer than you think." They should just be honest and say what they mean "Spend beyond your means!"

    Also, what did you notice in your comment after you posted (I mean, besides the typo in "still" in your follow up comment?

    @Rebecca – What kind of spreadsheets do you have?


    • I didn't notice anything… it just occurred to me again how stupid it was.

      TFSAs: I'm pretty sure I was told you lose your contribution if you withdraw (by a VanCity rep). Like if you deposit $5000 and take out $2000, you can't add more money until the next year rolls around. But maybe they were crazy.

      Is "Til Debt Do Us Part" a reality TV show? Then you have your answer to your question. I have heard you mention it, though.

      I didn't actually say to put your savings in an RRSP rather than a TFSA, by the way. I actually said just take the tax hit. But hey, if TFSAs are more flexible than I thought, then TFSAs sound like a good place for emergency funds.


      • I can fill you in on TFSA stuff (I have friends in the Dept of Finance, Tax Sector who developed it, so I got the skinny on it BEFORE it was announced in the 2008 Budget). They are EVEN better than RRSPs in many ways.

        As of right now – you can carry your TFSA room forward AND if you take money out (say $3000) in 2009, then you can put up to $8000 ($5000 + your original $3000) back in 2010. These are registered, so there's a bit of lag time with allowable room calculation, hence the need to wait until the new year. So the Vancity rep was right-ish. I imagine that the government will close this loophole eventually, but not yet!

        As you know, the beauty of the RRSP is that you put in "pretax dollars" (i.e. you get a tax return on the amount you put in). It's one of the few tax breaks available to most middle and upper class Cdns, but it really only defers the tax until you are a senior when it's assumed you'll be in a lower tax bracket. In situations like that of my parents (and yours, too, Beth), they won't be because of pensions, so they'll have a huge tax burden when they have to collapse their RRSPs/convert them to RRIFs.

        With the TFSA, you can use it as an emergency account or whatever, but our strategy (and yours, eventually, Beth because your pension is kick ass) is to use it as additional retirement savings. You put in after tax money…and YOU NEVER PAY TAX ON IT AGAIN. So the money will grow and grow and grow, and you won't pay tax on the interest or capital gains when you sell…it's an amazing deal. There's a similar one in the US (the Roth IRA) that is proportional to what you make (like the RRSP, and it HAS to be used for retirement). The $5k per year limit here is low, but over time it's even better than the US one.

        We plan to max out our contributions every year. I LOVE, LOVE, LOVE it!


        • Only my mom has a full pension – I think my dad has a partial pension of some sort from his Mack Truck days, but Distex didn't have a pension plan. And I think they lost a fair chunk of their RRSPs when the economy tanked, so maybe not so much to lose in taxes when they take it out?

          Also, I've been meaning to ask you, Sarah, where you have your TFSAs invested. I'd assumed that since they are called Tax-Free SAVINGS ACCOUNTS that you had to have it in a "savings account," but have since been told you can use them in other (more lucrative) investments, so that you are actually making enough money to make the tax-free earnings actually worth something.


        • Thanks for the info, Sarah. Didn't realize you got the contribution room back at the beginning of each next year. That's handy.

          I don't really think middle and upper class Canadians are hurting on tax breaks, though (at least not compared to the rest of the population). They not only get the huge exemption just like everyone else but they are also FAR better positioned to take advantage of the fact that capital gains are taxed at only HALF the rate of salary. Plus corporate and business taxes are criminally low (and Harper and his cronies of course want to reduce them even further), even fewer working class people are going to have the education credentials (which are getting increasingly unaffordable) to access the (very few) remaining jobs with pensions (you have to remember that really only government jobs and super-elite jobs have pensions these days), and overall, the tax system is not run by people who have a vested interest in helping out the underprivileged in our society.

          TFSAs are a perfect example of my last point, as is the recent (ridiculous) renovation tax credit: you need to actually have extra money to make use of these "benefits." If you are underemployed, unemployed, part-time employed (ever increasing), or just in a minimum wage job (or a job at $16/hour if you happen to live somewhere where the cost of living is high, like Vancouver or, I would assume, Toronto), you are not exactly going to have the extra money to take advantage of these money-saving tax vehicles. Just like with RRSPs–great for you, me, Beth, and probably a lot of our friends who have (or had in my case) decent-paying jobs and who know how to budget. Useless to anyone who is struggling to make ends meet, which is a shockingly frightful number of Canadians–an increasing number, no less.


  • Want to swap spreadsheets? I have one I use I found on a knitting blog and I've been using it for the last two years. It's pretty flexible and allows me to indulge in my love of playing with MS Excel 🙂


    • If you read this, Rebecca, I'd LOVE to see your spreadsheet (or yours, B.). I have never been on a tight budget, either, but that's my plan for the new year. We save tonnes and are on track to pay off our mortgage soonish (and no other debt) but I'd like to see if we can save every cent of one of our paycheques. We will see…


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