My Housing Costs

When I first moved to North Vancouver, I moved into a one bedroom apartment with a roommate. North Vancouver is known for being a fairly expensive place to live (besides Victoria and the downtown core, probably the most expensive place in BC). We were paying $1100 a month, so split between us, that was $550 each.

In May, I moved out into the new place that my wife and I will be living in once we’re married. It doubles our square footage, is in a much quieter and safer neighborhood, and comes with access to laundry – three of our most desired features in a home. We thought we’d have to spend at least as much, if not more than I was paying in order to get this place, but luckily because of the economy, my monthly rent is $900. Hurray, that means less rent, right?

Well, not yet. Until we’re married, I’m taking on the rent at this place alone. My parents are willing to lend me the money to help me out over the next few months, if necessary, but that just means more debt I don’t want to go into. So all of a sudden my monthly rent is $350 more a month than it used to be. In addition, I have to pay for one third of the monthly utilities in the house (it is a basement suite). I haven’t seen a bill yet, but I would estimate that it is going to be in between $100-150 a month. That brings my total to, let’s say, $1000 a month on housing. If I was making a significant amount of money, that wouldn’t be such a problem. Sadly, $1000 a month is 62.5% of my monthly net income.

How Much Should I Spend?

This, like so many other things in personal finance, is personal. It differs depending on your situation. If you’re living at home with your parents, your “rent” may be $200 a month – if that. Your percentage might be 0! Your monthly costs are going to change if you are sharing a place, like with a roommate or a spouse, it is going to change depending on where in the world you’re living, and its going to depend on your preferences. For Ashley and I, our home is the most important place. We wanted a place that made us feel comfortable, safe, and like we were at home. We spend a lot of our time at home, so we would rather spend more money on our living expenses and decrease the amount we spent on going out – because we don’t go out that often.

There are some “rules of thumb” out there. Gail, the host of ‘Til Debt Do Us Part, recommends around 35%. Gary Foreman over at Living a Better life says 30 to 35% of your net income. Crown.org says 36%. If you’re single and living in the city, it is not unreasonable to be paying 50-55% of your income, and if you’re living at home, 0% is possible. But the average recommendation seems to be around a third of your income.

My Ideal Housing Percentage

Once I am married and Ashley and I are living together, our joint income will significantly decrease the strain on my finances. At that point, $1000 a month will be about 33% of our take home pay, something that is quite “average”. However, that is not yet my ideal.

As I move towards Serenity, a financial life free from stress or strain, I am going to seek to create a gap in our finances. Leeway in our budget means less stress. If I have to worry about whether or not I can eat dinner because I am not sure if I can make rent next month, I am not going to be stress free. One third of our finances going towards our rent is manageable, but if one of us were to lose our job, or get injured, it would quickly become very tight.

Instead, my ideal is to increase our income to the point where our housing cost is 25% of our income. I am okay with 33%, I would prefer 25%. At 25%, there is enough room in the budget to play with potential costs. Once it is at 25%, I would love to keep it there for as long as possible. That means that if we decide to “upgrade” in the future, I would love to keep that percentage. For now, my goal is simply to reduce it to that amount.

That means we need to increase our monthly income by about $1000. Ashley is working towards a raise that would help, and I am working towards achieving a full time position that would also increase our monthly income. This is a long term goal, so I am hoping to achieve an extra $1000 a month in 1-2 years.

What about you? How much are you spending on your housing? Don’t know? Try recording your spending.

As The Great Blog Off enters its final week, I just wanted to give you some insight into who I am, and how I got to be blogging about personal finance on the interwebs. Its not like I woke up one day thinking to myself, “gee, I wonder where I can find the best interest rate in a savings account?”

I believe it all started back in college. At the time, having no income forced me to live in such a way that I could save as much money as possible. I spent four years sharing a one bedroom apartment with at least two other guys, eating a lot of Kraft Dinner, and washing my laundry only when absolutely necessary. Post graduation, I moved to one of the most expensive places in British Columbia – North Vancouver. Along with a 3x increase in monthly rent (while still sharing a one bedroom apartment with a roommate), I also got the highest paying job of my life. I was soon living a much less frugal life, with regular pizza and beer nights, a high definition TV, and a trip to Hawaii. I was making more money in two weeks than I had made the entire year working part time at college.

Six months after it began, it was all over – literally. I was unemployed, and quite broke. All the money that I made was now gone, to video games and a full freezer. Thankfully, I hadn’t gotten myself into anymore debt, but suddenly student loans needed repaying, and a wedding was on the horizon.

My television was still getting its regular use, however, and my unemployment was spent watching far too much TLC. One show managed to catch my attention, and I started to watch it on a regular basis. It was called, “Til Debt Do Us Part”, and it featured Gail Vaz-Oxlade telling couples who got themselves into a lot of debt how to save their money and their marriage. It intrigued me deeply, and I started getting more and more interested in my own finances. I knew that I was in student loan debt, but I was otherwise okay, as I wasn’t racking up credit card or any sort of consumer debt. I wasn’t spending more than I was making. However, at the end of every month I would have always spent all of my money, and I didn’t know where it was going.

So after I got a new job and started working full time again, I started tracking my spending. Soon I found out that I was spending way more money on things that I shouldn ‘t be (mostly toys and food), and decided to cut it out. At the same time, I wasn’t making as much money I used to be, but I was used to spending a lot more money. I was forced to live more frugally, so I started cutting things out, but I still felt financially stressed.

So I started reading lots of personal finance blogs, learning about how I can save more money. I started enacting some of the things that I was reading about, like setting up an emergency fund, calling my service providers and getting them to reduce my expenses, and automating all my finances. I have started to see a difference, perhaps not in my bank account, but in my attitude. I have found a joy in saving money, and I feel in control. I’m making less money than I was before, and when I get my paycheck I still get worried about all the bills and how I’m going to save for a wedding, but I feel as though I’m headed in the right direction.

I’m excited for the future, because I can see a day where I won’t feel financial strain or stress. I can see a day where I can afford to live how I want to live, and feel financial freedom. That day is coming, and I hope that you can come with me as I learn by living.