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Saving for a down payment

For the past few years, I’ve been on auto pilot with my finances. My retirement savings are automatically withdrawn every pay day, and at the end of the month whatever is left over, I put into a general savings account. It’s what I’ve always wanted for myself – to be savvy enough to create a budget and (for the most part) stick to it every month, and to have enough income coming in that I could afford to do the things that I want to do, without financial struggle.

Related: Here’s how I saved 50% of my income in 2016

Because my finances are automated for the most part (I still manually pay all my bills), I haven’t had to put in effort to save for anything … and this realization actually made me feel pretty bad about myself. That’s in part because, aside from my long-term goal of early retirement or the occasional big trip somewhere, I haven’t had an actual financial goal in years. I’m talking about a big financial goal that would require me to create a plan and actually work hard to achieve it.

Until now.

Since RD and I have made it our goal to one day buy a home (probably, maybe sometime this year), all of a sudden my new goal is to save for a down payment, because the amount we put down on our future home is riding on how much I personally can save.

Right now I have $53,000 earmarked specifically for a future down payment (this lives outside of my general savings and my emergency fund accounts). RD has much more than that – so much more that it would actually be impossible for me to match his savings even if I tried my hardest this year. And since we are planning to go 50-50 on the down payment, the amount we will have saved really depends on how much more I can squirrel away.

It seems weird to even talk about saving for a down payment, when I was so sure we would be renters for years. But now that we both understand we’ll be here long-term, it actually does make sense to buy if we can find a place that costs about the same to own as to rent. The only problem is, those places are very rare, and we’re willing to wait until we find a home that we can love for 10+ years – and until the Vancouver real estate market settles down … which is why we have no idea when we’ll end up buying.

Related: How I saved for my down payment

My dream is that we’d have $150,000 combined for a down payment and closing costs, which means I’d have to save $22,000 more to come up with my half. Admittedly, this is a somewhat unrealistic goal considering our travel itinerary this year and the fact that I refuse to lower my retirement contributions, but there’s an outside chance I can get there. Of course, it depends on when we actually decide to buy, but I will still try to come up with some sort of plan to get me as close to my goal as possible. Stay tuned!

How I saved 50% of my income in 2016

In my last post, I explained how I spent $34,700 in 2016 – which seems like a lot! But I also managed to save 50% of my income and increased my net worth by over $40,000.

Here’s how I did it:

A new job with a new salary

IMG_1770In the fall of 2015, I started looking for a new job. I was thankful to the organization for giving me the opportunity to get my foot in the door of an industry I knew nothing about, but I felt like 1) I was underpaid, and 2) in a position too junior for my skillset with no room for growth. I wanted more of a challenge, and yeah, I wanted to make more money. :)

After interviewing with a few organizations, I finally accepted a challenging role with my current company – at a compensation level that I felt was more appropriate for my experience. It’s a nice feeling to finally feel like your pay grade and your responsibilities are in line with your skills.

Related: When it’s worth it to take a pay cut

Within 3 or 4 months of being with the company, I received a small raise (yay!), and a bit of shuffling in my organization gave me the ability to start banking a lot of overtime hours for use or for payout (which is one of the biggest perks of the job for sure).

I took advantage of my work benefits

My company offers a small RRSP match as well as the ability to take part in the corporate share purchase plan. Both these benefits force me to save more through automatic payroll deductions, and with employer contributions included, I ended up with $7,000 in the bank that I hadn’t been saving the year before.

I increased my retirement contributions three times

I started 2016 off by saving $950/month towards retirement. Then I increased it to $1,200. Then $1,350. Then $1,685 – which is where it sits right now. I basically ended up almost doubling my retirement contributions, and found that it really had no impact to my lifestyle at all.

Related: Can you save too much for the future?

This was possible because…

I sold my house and went back to renting

IMG_9424Selling my townhouse and moving in with RD freed up a significant amount of money every month. My mortgage, strata fees, and property tax was costing me $1,380. Add in $250 for gas and parking at work, and that’s $1,630/month I was spending to own my home in the suburbs. Now that I live right in Vancouver? I pay $825 for rent, don’t pay for parking, and only need to fill up my gas tank once a month.

Some of that extra money went towards lifestyle inflation (like traveling and entertainment), but most of it went towards increasing my retirement contributions. :)

I am actively engaged in my finances

Prepping veggies for dinnerOkay well this is obvious! But I truly believe that keeping track of my finances in my Excel spreadsheet helps me save more. I always know how much I’ve spent in any given month, and the process of inputting purchases into my spreadsheet is a bit of a shame mechanism when you have to see it there for an entire year. :) And getting to input my savings transactions just gives me such a thrill. Yes I’m a nerd, and yes I know that most people won’t be as active with the finances as me. But as long as you are being truthful with yourself and you know where your money is going each month, that’s all that matters. I just probably take it to a whole new level that may not be totally necessary.

But being active with my money constantly shows me new and different ways I can save more money. For example, I was pretty pleased when I saw that I spent an average of $251.31 per month on groceries, knowing that I could definitely trim that down even further since we ate out at restaurants way more than necessary for about half of last year.

Mutual financial goals

RD and I have talked a lot about the future in terms of where we’ll be and what we want to do in the next 10 year, as well as how we see retirement. We have lofty goals, and those goals require money. Knowing we are on the same page gives me so much motivation to save money and make good financial decisions so that our future together can be healthy and happy. It also helps that we have very similar spending habits (although, RD is probably definitely more frugal than me).

2016 was a good year for me financially, and it will be hard to top. 2017 will be interesting as I have a lot of travel plans, and we are both saving diligently for a down payment for something, somewhere. :)

Did you meet your savings goals for 2016?

The case for un-automating your finances

So many personal finance bloggers and professionals will tell you that automating your finances is one of the best ways to manage your money. Nowadays, everything can be automated if you want it to be – your pay cheques, savings, RRSP, investment contributions, as well as all of your monthly recurring bills.

But even though you may think you’re making your life easier by automating everything, you might be doing more harm than good. Automating all of your finances can lead to bad spending habits, because you aren’t conscious of where your money is going. And, when all of the work is being done for you, you might not check up on your accounts as often as you should be.

I personally only automate my retirement savings. Everything else – such as utilities, cell phone, internet credit card bills, and short-term savings – I make manually every two weeks when I get paid. Here’s why:

My income fluctuates

Even though I have a full-time job, my income can fluctuate wildly from week to week depending on how much money I bring in from my freelancing jobs. While it’s possible to budget and automate when your income varies, I find it a lot easier (and a lot less stressful) to manually pay my bills. Especially when not every company offers monthly billing cycles that end at the end of each month. I keep track of when my payments are due in Google calendar – that way I always know that I have money in my account to pay each invoice.

I like moving my money around

This might be the personal finance nerd in me, but is extremely satisfying to click a few buttons and see bills getting paid, or my savings account growing. It’s proof that my hard work is worth something, and it reminds me that my goals are real and attainable. It’s a feeling you can’t get when the bank does all of the work for you.

Don’t forget to read the terms and conditions

Sometimes life can get busy, and by the time you get around to looking through your cell phone bill, you might have already had the payment automatically deducted from your account. I used to work in a call centre for a company whose terms and conditions stated that receiving payment is your acknowledgment and agreement to all of the charges on the invoice. So it’s important to look through your invoices in a timely manner, as well as carefully read through your terms and conditions of service with each company.

It forces me to pay attention

Since I started taking control of my finances, I’ve made it a habit to log into my online bank accounts at least three times each week. Over the years, I’ve caught three different fraudulent charges on my credit card – one was for a larger sum so it was more noticeable, but the other two were for recurring charges of under $10/month. If my credit card bills were on automation, I would be much less inclined to check my accounts as often, or as closely, so I might have missed catching and disputing those charges.

Also, companies make it so easy to automate payments. From your Netflix account to your gym membership to those domain names you’ve never used that keep auto-renewing every year – sitting down to pay your bills might take an extra hour each month, but it really forces you to see where your money is going and what expenses you can cut. It helps you have a better relationship with your finances, and you might realize that you’re paying for a lot of things that you just don’t use.

What bills do you have on automation?

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