Every household needs a budget and everyone should learn to live by one. But if you don’t, here are some samples to better understand the cost of living.
Most expenses can be broken into one of five categories: shelter, food, clothing, transportation, and luxuries. Shelter includes all utilities and insurance, food includes grocery store items plus eating out, and transportation includes all the costs of owning a car (if you have one).
Sara
Let’s start with Sara our hippie chick. Sara rents an apartment that includes utilities plus internet, uses only her cell phone, and takes public transit. Her expenses are as follows:
| Item | Monthly | Annual |
| Rent | $600 | $7,200 |
| Phone – Cell | 50 | 600 |
| Home Furnishings | 50 | 600 |
| Groceries | 350 | 4,200 |
| Food – Out | 150 | 1,800 |
| Clothing | 50 | 600 |
| Transit Pass | 100 | 1,200 |
| Dental & Drugs | 50 | 600 |
| Haircuts & Hair Care | 50 | 600 |
| Entertainment | 100 | 1.200 |
| Vacations | 100 | 1,200 |
| Gifts | 40 | 480 |
| Bank & Finance Charges | 10 | 120 |
| Savings | 100 | 1,200 |
| Totals | $1,800 | $21,600 |
In order to clear this amount, Sara needs to earn $24K / year. So she works an average of 35 hours per week for around $14.25 / hour.
Brian and Brenda
Now let’s look at a married couple who live in a house, have two kids, and a dog named Waldo.
| Item | Monthly | Annual |
| Mortgage Interest | $400 | $4,800 |
| Mortgage Principle | 1,000 | 12,000 |
| Property Taxes | 250 | 3,000 |
| Gas/Heat | 100 | 1,200 |
| Power | 150 | 1,800 |
| Water | 200 | 2,400 |
| Television | 75 | 900 |
| Internet | 75 | 900 |
| Phone – Home | 25 | 300 |
| Phone – Cell (2 phones) | 150 | 1,800 |
| Home Insurance | 75 | 900 |
| Home Maintenance | 200 | 2,400 |
| Home Furnishings | 200 | 2,400 |
| Groceries | 800 | 8,400 |
| Food – Out | 600 | 7,200 |
| Clothing | 500 | 6,000 |
| Auto Depreciation (2 cars) | 500 | 6,000 |
| Auto Fuel (2 cars) | 350 | 4,200 |
| Auto Maintenance (2 cars) | 250 | 3,000 |
| Auto Insurance (2 cars) | 200 | 2,400 |
| Life Insurance | 100 | 1,200 |
| Childcare | 1,000 | 12,000 |
| Haircuts & Hair Care | 100 | 1,200 |
| Gym Memberships | 100 | 1,200 |
| Entertainment | 400 | 4,800 |
| Vacations | 400 | 4,800 |
| Gifts | 200 | 2,400 |
| Pet (Waldo) | 150 | 1,800 |
| Bank & Interest Charges | 50 | 600 |
| Savings (RRSP) | 300 | 3,600 |
| Totals | $9,000 | $108,000 |
Collectively, Brian and Brenda earn $140K / year and pay all their taxes.
Summary
There are a number of points to make:
- Cars cost lots of money.
- Pets cost lots of money.
- Sara budgets for dental and drugs because her company doesn’t have a benefit plan. Brian and Brenda both work for companies that do.
- Sara is famous for using coupons, colours her own hair, and keeps in shape by walking or exercising at home. For gifts, she makes cookies or gives people her time (e.g., help clean house or paint a room) and makes awesome cards that are personal.
- Smoking is another $150 / month (based on ½ pack per day). And if you drink a daily glass of wine, that’s another $1-200 / month (based on 4 glasses and $12-25 per bottle).
- Employers need to understand their employee’s cost of living.
- National inflation figures are off because they don’t take into account cultural shifts. For example, vacations and pets have become part of basic needs (and both cost loads of dough).
- People in lower income positions often lack the ability to live on their earnings. That’s why so many have trouble with high interest rate purchases (e.g., don’t pay ’til May) and credit card debt.
Are you living within your means?