Thursday, 3 January 2013

Pay Day

Pay day.  A day that is dear to every worker's heart.  The trick is not loathing the week prior to pay day as you watch the balance of your checking account fall into the red.  In the past I haven't had a problem with this.  I am, by nature, quite frugal.  Yes, I know the f-word.  It's not that bad, really.

Through out my university career I was able to track my expenses without a budget.  I earned about $1,200 net a month and expenses were kept low since the military paid my tuition (ROTP program) and I shared accommodations with my sister.  I could comfortably spend what I wanted and have over $500 a month left sitting in my checking account which would eventually make it to a savings account.  It worked well for me for 4 years and I left University with over $47,000 in my bank account.  Which allowed me to put a downpayment on my first house this November.

Unfortunately this system no longer works.  Being the proud owner of a new house and living by myself has somewhat stretched my dollars.  To complicate things I get paid only once a month so all expenses need to be accounted for at the beginning of the month so that I don't run out.  I now have to work off a budget.

Here is how my pay check will be allocated for the month of January.  I allocate in two ways, by percentage and by importance.  Percentage wise I generally follow the Life Pie numbers suggested by Gail Vaz-Oxlade.  The only change is I spend 40% on required housing payments (regular mortgage, taxes, insurance, and maintenance) and only 10% on debt repayment.  The reason for this is that I have no debt besides my mortgage (no car loan or line of credit and my credit card never carries a balance).  As a result, the 10% allocated for debt goes against my mortgage.  (Leading to 50% of my take-home pay going to housing, but keep in mind I fully intend to be mortgage free by November 2017.)

-35% Housing
-15% Transportation
-10% Savings
-15% Debt Repayment
-25% Life

I also allocate based on importance.  The most important categories get allocated first and are generally first on the list.  These include fixed expenses like mortgage and taxes as well as important savings such as emergency and retirement savings.  Obviously this list is not perfectly ordered.  If I found that my food budget was underfunded for the month, I would reallocate from somewhere such as travel or big ticket items.  However, numbers such as my food budget are based on what I spent per month on average over the last four years.  The hardest part about this month's budget was how much to allocate for utilities.  I have yet to receive my first bill and as such had to make an educated guess.

This months pay check will be divided as follows:

Pay $3,588.02

Mortgage - $646.62
10% Debt (to double up mortgage payment) - $358.80
Retirement Savings - $358.80
Emergency Savings - $240.10
House Maintenance - $315.00
Housing Taxes - $182.50
House Insurance - $72.00
Big Ticket Items (Planned spending) - $100
Travel - $175
Health Insurance - $23.52
Bus Pass - $68.25
Cell Phone - $35.00
Internet - $50.00
Car Savings - $350.00
Gas - $120.00
Utilities (Electricity, water, sewer) - $200.00
Food - $160.00
Miscellaneous - $20.00
Entertainment - $10.00
Social/Sports - $15.00
Clothes - $10.00
Gifts - $10.00
Financial Planning - $15
Left over - $52.43

The $50 of wiggle room makes me comfortable and if all goes as planned this will eventually be spent on paying down my mortgage or padding my emergency savings.


  1. I am not sure how I found your blog, but I enjoy reading it very much. I admire your serious approach to your financial life; I wish I would have been half as focused when I was younger. Keep writing and sharing your progress. It is inspiring!!!!

    1. Thanks for the encouragement. It's nice to know you enjoy reading it as much as I enjoy writing it!