Where Did All My Money Go? – Part 2

A jar full of coins, seen from the top.

In this article, I’ll discuss how to create a two week spending plan so that your money will last until the next payday. (For tips on determining your expenses, see part 1.)

Let’s assume you’ve now figured out your spending, and your monthly fixed expenses look something like this:

  • Mortgage/Rent                                $1,100
  • Groceries                                            $   400
  • Power                                                   $   105
  • Heat                                                      $     95
  • Cable/Internet                                 $   150
  • Cell phone                                          $   105
  • Car insurance                                   $     75
  • Credit card payment                     $     60

Total:                                                     $2,090


I know this is not a comprehensive list, and I also know that it doesn’t include anything like entertainment or unexpected expenses.  I have included only fixed expenses. These numbers also represent a single person living alone.  When you calculate your own numbers, make sure you include all household income, as well as all fixed expenses related to children, such as daycare, soccer, etc.

So you now know that your fixed expenses total $2,090.  Let’s assume that your annual income is $45,000 and you get paid twice a month.  Taking into account tax deductions, CPP and EI contributions, you would probably be taking home approximately $2,900 per month, give or take, which is $1,450 per cheque.  I would suggest that you divide your monthly fixed expenses in half, which is $1,045, and set aside $1,045 out of each of your two pay cheques to pay these bills.  I actually have a separate bank account where I keep all the money for my fixed expenses.  This account is not linked to my bank card, so I can’t accidentally spend it.  And I also know that I cannot take money out of this account for anything else.

Once you’ve deduced your fixed expenses from your cheque, you are left with $405 out of each cheque to pay for all your other variable expenses, like gas, entertainment, etc.  This amount is what you can spend over the next 15 days until your next cheque.

The final step is to divide your $405.00 in half once again.  This gives you $202.50 to last you for approximately 7 days until your next paycheque.  Keep $202.50 in your account that’s linked to your debit card and then move the remaining $202.50 into your savings account.  If you don’t have a savings account, you should get one.  Just find one where the bank fees are not too high.

Okay, now all your money is divided up.  Now comes the hard part – the discipline!  You must have enough discipline to spend only the $202.50 during the first week.  If you can exercise that discipline, you will be rewarded with $202.50 in your savings account to spend the next week.  And if you were really disciplined, you might even have some of that original $202.50 left over!

I also suggest that you always put some of this money away into long-term savings, as well as short-term savings.  I know it’s not easy, but it really needs to be done.

Please note that this is a very bare bones outline of one way to manage your paycheque.  I know that I have made this seem very simple and straightforward.  I also know that people have many more expenses than what I’ve listed here.

There are many different methods out there.  I have chosen to write about this one, because this is how I manage my money and it seems to work for the most part.  Having said that, there are certainly times when we’ve spent too much in one week and had to stay home and watch TV the entire week before payday because we blew two weeks’ worth of spending money in one weekend.  But live and learn!

I hope this method helps you make your money last until the next payday.  Good luck!

Article by freelance writer, Sharon Skwarchuk.

Where Did All My Money Go? – Part 1

paper showing finance, saving, and computer

How many of you have eagerly looked forward to payday, only to discover three days later that you’re already broke again?  Probably a lot of you!  This can be a common theme for people struggling with their finances – you always get to the end of the money before the end of the month.  And you can’t seem to figure out what you spent the money on!  Why does this keep happening?

It’s likely because you aren’t paying attention to what you’re spending.  Debit and credit cards make it really easy to thoughtlessly spend money. But using cash is often not any better, as it’s harder to track. So regardless of your preference, you need a good way to track your spending closely.  You need to record everything that you spend your money on, whether it’s $200 on groceries, or $3 on a coffee from Tims.  EVERYTHING.  You can do this different ways – you can write it down in a spending journal, carry a little notebook with you to record everything, or you can make a list on your phone. 

However, my favorite way is to use an app that keeps track of your spending.  There are a lot out there, but the one I use is called Expense Tracker.  It lets you enter your income and your expenses into different categories. Then it uses this information to create charts so you can see what you’re spending each month.  For example, you can create a specific category and then assign it a color.  Do this for all of your spending categories – groceries, cable, gas, etc.  Once your information is entered, the app will then create a colored pie chart or bar graph incorporating all the different categories, so you can see easily how much of your money is going to each category.  It will also give you a bar graph if you rotate your phone, so you can do it either way.  It’s a really handy app, and it lets you add additional categories so that you can tailor it to your needs.  And because it keeps a running tab of what you’re spending on each category each month, it really helps you see where your money is going.  There is also an upgraded version that you can buy for a few extra dollars which lets you input recurring expenses, like your mortgage payment.

So you need to track all of your expenses for a month or two (two is better).  Once you’ve done this, then you’ll have a better idea of what you’re spending on different things.  Now you can start figuring out how to make the best use of your money – do you really need to go to Timmy’s every morning and spend $3 on a coffee?  Wow, am I really spending $50 a month on lottery tickets?  Or you’ll notice that you’re not actually putting as much money into savings as you thought you were, or you’re spending way too much money at the App store.  All those little purchases for $6.99 or $2.99 can really add up! 

Another feature I like is this:  because you can also put in dates for each expense, you can tell if there are days where you spend more money than other days.  You can even sort your expenses by date.  I discovered that we typically spend the most money on Fridays and Saturdays after a payday, so I am now consciously making an effort to watch my spending on those days.  Instead of going out Friday and Saturday, maybe we’ll just go out one day and not both.  I also try to have days (during the week is easier) where I will not spend any money at all, which means no stops at the grocery store, no buying gas, no spending money at the App store, that kind of thing.  If you can string together a few days where you don’t spend any money at all, that’s even better!

So go ahead and start tracking your spending whichever way you chose.  In my next article, I will tell you how to take the information that you’ve gathered and use it to create a spending plan for the two weeks after payday, so that you don’t always end up broke by Monday.

This article is by Sharon Skwarchuk, freelance writer. 

Meena’s Note:
I like to use tracking methods that are cheap, easy, and electronic. I’ve experimented with Mint and used You Need a Budget for a while. But this year I noticed that banks are getting into the tracking game. I bank with ATB and they include a great tracking option. You can create categories, budgets, and use your phone app to see where you are at for the month. 

Are Budgets Stupid?

A rant by Meena Kestirke

What does every money guru say?

  • Make a budget.
  • You need a budget.
  • Start with a budget.

No. Wrong. I disagree. I hate budgets.

Why do I oppose them so vehemently? I’m glad you asked, fellow human.

Restrictive Systems Backfire

Have you ever tried to not think about something?

You: Don’t think about eating those cookies, self!
Brain: Cookie, cookie, COOKIE! Just one wouldn’t hurt.
Cookie…cookie…and then…
Homer Simpson drooling






Yeah, it doesn’t work for me either.

I’m stubborn. Maybe you are too.
If someone (including myself) tells me to do something, without a valid reason that I believe in, I don’t want to do it. I want to do the opposite.
Giving yourself rules just gives you something to rail against. It’s not productive.

You are the Only Person Like You

  • Have you ever heard the boring old rules of thumb about saving 10% of your money, or spending no more than 30% of your income on housing?
  • Have you seen those stats about how the average Canadian or American spends their money?
  • Have you been caught up in comparing your grocery spending to others on Facebook?

Stop that right now!

  • Don’t give a damn about how other people are spending their money.
  • Don’t compare.
  • Don’t look at those stats.
  • Don’t use a budget tool that tells you how much to spend in each category.

(Oops, I should refer back to section 1 – sorry for telling you what not to do.)

You have your particular dreams, desires, preferences. They are ALL valid!
I’m not saying you can get everything you want whenever you want it. But I want you to get as much of what you actually want as possible. Not what other people say is right, or think you should be doing.

It’s your life. Take it back!

Budgets can Encourage Overspending

a pile of books

Huh? What’s that now?

When you create a budget, you’ve planned to spend a certain amount of money, whether by category or as a total. If you use the “pay yourself first” philosophy, then the rest of the money is yours to do with as you will, right? There’s no harm in spending it. (Or so they tell you.)

You’ve given yourself permission to spend up to $X on “mysterious item”. What if you don’t actually want or need “mysterious item”?
By having a regular budget, you can get into spending routines, and bad habits. You remove the consciousness from the spending process. I want you to be fully aware of each and every purchase you make, whether it falls within your budget or not.

Budgets Should Never Be the First Step in Improving your Finances.

Not even the second step. Probably not the third. And aren’t necessarily needed at all. Lots of successful, happy people save lots of money and have never used a budget.

If you are having trouble managing your money and decide to work with me, there are many steps before we will even discuss if a budget is right for you.

Interested in learning more? Contact me. I have a great December promotion right now. Check it out.

Big Lottery Winner? Or Loser?

happy looking person holding bag of money with a question mark

Everyone dreams of winning the lottery and living the rest of their lives on Easy Street. Wouldn’t that be nice?  Of course it would!  But really, what are the odds of winning the lottery?  According to the Western Canada Lottery Corporation website, the odds of winning Lotto 649 are approximately 1 in 14 million and the odds of winning Lotto Max are about 1 in 28 million. 

Even if you played Lotto 649 twice a week, every single week, from age 18 to 931, your odds of winning are still only about 1 in 2,000. Or 0.05%.

For comparison, your odds of dying from an accident are about 1 in 22, or 100 times more likely than winning the lottery.

In fact, being struck by lightning over your lifetime is almost as likely as winning the lottery. And how many people do you know who have been struck by lightning?

Despite the terrible odds, thousands of people still play the lottery.  They all want to be able to quit their jobs and live a life of luxury.  And they spend hundreds of dollars a year for a tiny chance of winning.

Could that money be put to better use?

The Cost of Playing

Let’s say you start buying lottery tickets when you turn 18, and you stop buying them when you die at age 93. That’s 75 years or 3,900 weeks.

If you buy two tickets per week at $3 per ticket, that’s $6 a week, or $26 a month.

Multiply $6 per week by 3,900 weeks, and that’s $23,400 you’ve spent on lottery tickets during your lifetime.  And that’s only two $3 tickets per week – many people who play the lottery spend much more than $6 a week.2

The Lottery vs. Investing

Now, given the massive odds against winning, should you invest or play the lottery?  Let’s see what happens if you use this money elsewhere.

This graph illustrates the difference between playing the lottery and investing your $26 per month instead.3

Notice that, even with a savings account paying only 1% interest,  you will still end up with 10 times the amount you would by playing the lottery.

Of course even when playing the lottery you will end up with some money. For your $23,400, we’ve calculated you might win around $3,700.

We calculated this prize breakdown using the Lotto 649 website, assuming 7,800 plays:

  • 915 free plays = $300
  • 96 – 5 dollar wins = $480
  • 137 – 10 dollar wins = $1,370
  • 7 – 4 of 6 number wins (prize varies with an average 80 dollars per win) = $588

Total = $2,738

Then you also have a 14% chance of winning a 5 of 6 number prize valued at about $2,200

Assuming your winnings may be a bit higher than average, we determined the $3,700 amount shown on the chart. Or a loss of 80-90% of your money!

With that lost $20,000 you could buy a car, several vacations, or retire earlier than your lottery-playing coworkers.

Speaking of retirement, look at those investment returns! Even with a moderate 5% return, that extra $200,000 would be pretty handy wouldn’t it?

The Lottery vs. Insurance

In your lifetime you are about 1,000 times more likely to get cancer than to win the lottery. Which should you be more concerned about?

Let’s compare playing the lottery to two types of insurance:

Critical Illness Insurance

This is a contract with an insurance company that means you will be paid a lump sum of money if you are diagnosed with a “critical illness” (most commonly cancer, heart attack, or stroke).
Do you know anyone who has had these problems? I bet you do.

The money you receive can allow you (or your spouse) to:

  • Take time off work
  • Pay for expensive treatments that aren’t covered by Alberta Health Care
  • Pay additional costs such as babysitters, house cleaners, parking at the hospital, or whatever else you need

Then you can focus on your recovery without having the extra stress of worrying about money. 

The exact policy details will vary, but as an example, if you’re an 18 year old woman who doesn’t smoke and is in good health, $26 per month can buy you a $31,000 policy which will cover you until you’re 100 years of age. This also includes a return of premium if you don’t make a claim.

So if you estimate that 1 in 2 people will have a claimable condition (cancer, remember) prior to age 93, then you have a 50% chance of receiving the $31,000 exactly when you need it. And if you don’t have a claim before you die then your premiums are returned to your estate or beneficiary.

Compared to the odds of winning the lottery, isn’t critical illness insurance a much better choice?

Life Insurance

We’re all going to die at some point, like it or not.  Instead of playing the lottery you could spend your $26.00 a month on life insurance.  
For a healthy, non-smoking, 18 year old woman you could obtain $52,000 of coverage for your entire life.

Now, you may be thinking, what good is life insurance if I have to die in order to get it?  I’ll tell you something – life insurance isn’t about you.  It’s about providing for your family after you’re gone.  It’s about making sure that they are not going to get rocked financially after they have already been rocked emotionally by your death.  That’s why life insurance is a good idea.

If you expect to provide for your family by winning the lottery, think again.  It’s not going to happen.  Get life insurance instead – it’s a much better investment.  And your family will thank you for it.

Let’s compare your lottery earnings to the average insurance payout for the above two options.

Are you rethinking buying that lottery ticket? I hope so. There are so many better ways to spend your hard-earned money.

Co-authored by Sharon Skwarchuk and Meena Kestirke