My $1,000 Budget

(Photo source)

FB from one of my favourite blogs, Fabulously Broke commented on my November Recap, and asked me the reason behind my $1,000 monthly budget.   Great question!

This budget came from a combination of tracking my finances in 2009, and my saving goals.

Tracking my expenses in 2009:

As many of you who track your expenses know, this can be painful and shameful.  There were months when I didn’t really want input purchases into my budget sheet – even though nobody saw my budget but me.

There were months I spent $350 on clothes alone.  Or months I spent $300 on eating out.  There were months I spent $2,230 (hello, October 2009!).  There were also months I spent $675 (hello, July 2009!)  in total expenses.

This is how I spent my money in 2009:

I use FB’s Fabulous Budget Tracking Spreadsheet and I analyzed where my money went in 2009 to determine how I wanted to spend my money in 2010.

My bare bone budget is $750 and includes: rent ($335), groceries ($120), cell phone ($60), gas and car insurance ($220), Misc ($15).

Note: My parents lent me their car, and I pay them insurance at the beginning of the year.  I also pay for their cell phone plan ($17/month).  I know that my bare bones budget can further be reduced if I took  public transit and ask them to take care of their cell phone bill if I really need to.  So super bare bone budget is  $620.

Of course, living on a bare bones budget is not too much fun, although this would be my plan if I were to be unemployed or really wanted to save super aggressively.

The bare bones budget means none of the following: eating out, clothes, grooming/make-up, entertainment (i.e., volleyball), travel, massages, travel, gifts, etc.

My Savings Goals:

As I mentioned in my $100,000 at 30 post, I wanted to save aggressively in my twenties, when I have a fair bit of disposable income and have the power of compounding interest on my side.

Recap from $100,000 at 30 post:  Assuming 8% annual return and 2% inflation, if I had $100,000 in my RRSP by the time I was 30 years old. I would not have to contribute another cent, and by the time I retire at age 65, I would have an annual income of $50,000, assuming I live until age 85.

Since I was 25 years old at the time, I would have to contribute an average of $20,000 a year (until I was 30).  Holy moly, that’s a lot of money.  But was it do-able?

At the time, I was making a gross annual salary of $48,000.  After taxes, that was approximately $33,600 annually*.  If I save $20,000, I was left with $13,600 – approximately $1,133 a month.  And from my analysis of spending in 2009, this was certainly do-able.

From the average monthly costs I spent in 2009, and I came up with a budget that is sustainable.  I get a little fun in – mainly volleyball, eating out, and the occasional movie.  I can also go get my haircut at my favourite salon 3-4 times a year.  Life is looking good with a budget of approximately $1,000.

My average monthly sustainable $1,000 budget:

So there you have it.  By combining my barebones budget, some fun, and my savings goals, I came up with my monthly budget of $1,000^.

How do you come up with your monthly or annual budgets?

Cheers,


 

 

 

Note*:  My net income is a little more than $33,600 since the amount I contribute to my RRSP is not taxable income.

Note^: I don’t include car insurance in my monthly budget since I pay that upfront.

General Note: I don’t include my donations to charity or what I call the “Parent Fund” on this blog.

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18 Comments

Filed under Budget, Finance

18 responses to “My $1,000 Budget

  1. Ah thanks for clearing it up (and linking to not only my blog but my sheet!)

    This makes sense to me. It’s exactly what I’m doing. Watching my expenses as a whole for the year, and then seeing what I can live on that’s bare bones + a little luxury.
    :) Good luck. It’s a lot harder than I thought it would be, but that $1000 a month motivation keeps me on track.

  2. Agreed. Some months, I struggle with the $1,000, but it’s good to have something to strive for, and keep my on track.

    And you are very welcome, because your spreadsheet is amazing!! :)

  3. I’ve though about doing this myself, but over the past year and a half i’ve moved 4 times and changes jobs once, and because of this a lot of my numbers are skewed some months, like the 4 months I was driving almost 100 miles round trip to and from work each day and had to gas up ever 3rd or 4th day, and now that I’m paying a mortgage which is WAY higher than my rent ever was (but it isn’t hurting me at all!) Maybe I can pull the last 6 months that I’ve been living in my house and try to go from there? I’ll have to check it out and see how the math works out!

    Gosh I wish i could live off of $1,000 a month! (my mortgage alone is $1,250! but that is about what I’d pay for a 1 bedroom apartment around here!)

    • A budget is dynamic, and as my circumstances change, it will have to be updated. I can see how it can be difficult if you circumstance change more frequently. For instance, if I were to buy a car or have mortgage payments, my budget would definitely be much more! Maybe you can work something out when things settle down?

  4. Don’t have an annual budget (it’s my first year out of uni and my first year of FT income / full year’s tracking and spending info.)

    We just went through a month where we lived, not bare bones, but with a little spending and no extra expenses, and managed to stay at $2500, which was what I’d worked out our basic budget should be.

    So that’s how I work it out! rent, groceries, transport, utilities and a little bit of fun money every week.

    That doesn’t include savings – the $2500 is strictly expenditure.

  5. I make the same amount of money you do and I’d love to live on a $1000 / month budget :( but my fixed expense is already $1500 that includes my rent, utilities, car payments (yeah.. bad mistake, but I bought a used one already), parking, life insurance, critical insurance & money for my parents. I can’t wait to finish paying up for my car so I can start saving that money!

    I try to keep my variable expenses as low as possible (i.e. my food, gas, cell phone and etc.)… I’d be happy if I am able to keep my variable expenses under $700! :)

    Good job on living off a $1000 / month budget!

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  7. Wow, you’re going to have so much money waiting for you at the end of the line when you get through this $1,000/month challenge you’ve given yourself. How long do you think to keep this up? Forever? Until you have $100,000? Until you’re 30? Or just until life changes?

    I wish I could get everything in for under $1,000 – that’s amazing – and inspirational. =)

    • I’m not sure how long I’ll keep this up for. I want to do it again in 2011 :)

      I’d certainly love to reach my goal of $100,000 by the time I’m 3o. But I think the more appropriate answer is when life changes. I would not be able to live on this budget if I had a mortgage or higher insurance rates. For now, I’ll just milk the savings. Is there such thing? ;)

  8. Your budget looks almost identical to mine, nice work! At first it was a bit of a challenge, but now it’s just how I live which makes my choices a whole lot easier.

    • Great minds think alike? ;)

      Definitely some months are more challenging, but I like a challenge. But this year, I got used to it, it was painful stepping into a mall. All the people, advertisement and constant bombardment of the media telling me what I need to make my life better. Not to mention those months make it harder to stick to my $1,000 budget.

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