Case Study: Wet Coast Canucks working towards freedom

[FrzenStache]

Life Situation: Common-law (soon to be married) couple in our mid-20's with careers starting to pick up, living in a high cost of living area (Vancouver, BC) to be close to friends and family.  We have separate finances, and until recently there was very little visiblity into SO’s finances.  Moving towards joint budgeting, setting joint long-term goals, and increasing monthly savings rates.  Also we have spendy friends contributing to some keeping up with the Joneses behavior (shopping, restaurant and entertainment categories).

In the past I’ve tried to change to make SO change too many habits at once, having much better success recently with incremental improvements tied to shared goals (vacations, stay at home parent, home ownership)

Sharing one vehicle and living in an area where our workplaces are 10 min drive (SO), and 30 min commute (public transit) – in opposite directions.

Pre-tax Savings: $500/month from SO’s pre-tax salary is allocated to employer’s defined benefit pension

After Tax Income:   $6600 combined (We earn roughly the same amount)

Current expenses:
Rent -       $1650
Shopping    $1000 (Clothes, hair, makeup, nails, DIY materials)
Utilities      $65
Internet    $45
Car Insurance    $110 (high premium area)
Gas      $120
Bus Pass    $124
Wedding Prep   $300 (average monthly spending
Restaurants   $500
Groceries   $650 (this includes general costco shops as well)
Cellphones   Me - $33 (reduced from $70 last month)
      SO - $55  (reduced from $80 last month)
Entertainment  $400   drinks, cabs, movies and concerts, etc
Savings      $1100
Misc.        $450
Assets:

2012 Hatchback - $8500 Book Value

Me - $7000 in TFSA 70/30 equity/bonds – passive index, low MER

SO - $41000 TFSA (maxed), $20000 in RRSP – Overall allocation 60/15/25  HISA/Equity/Bonds – SO’s preference for allocation is much more conservative (90/5/5), progress has been made here

Liabilities:
Me - $20000 – Interest free family loan (formerly 5.5% govt student loan) - $850/month payment via me paying all rent and utilities

Specific Question(s): I’m interested in hearing any advice, feedback or criticism of our situation.  I’ve been trying to practice mustachianism solo for the past year while aggressively paying down debt, and only recently seeing progress with SO, but would be great to have other opinions on our current setup and trajectory.
One of my main questions is how do you set realistic monthly savings goals when there seems to be unexpected expenses every month? (Car repairs one month, vet bills another, furniture another, etc.)  How have you set household budgets when your SO doesn’t provide full visibility?  How do you track grocery spending when primarily shopping at Costco and buying groceries + other things?

[Zikoris]

As a fellow Vancouver couple, don't use "it's an expensive city" as TOO much of a crutch to excuse overspending. It's about choices.

Here's what we spend in those categories for reference:

Rent + insurance: $765
Utilities: $0 (included in rent)
Cars: $0 (no cars because we live in a city with an excellent network of bike paths and ample transit)
Public transit: $42 to $63 depending how many books of tickets we buy
Restaurants: $20
Internet: $28
Groceries: $230
Two cell phones: $51

I would slash every single category of your budget. They all seem crazy high.

As for the specifics:

I think it makes sense to just have money set aside for unexpected expenses (I'm not sure how furniture fits in there, but sure) given your situation. We don't personally do that because we just keep a massive gap between our earning and spending that allows us to just cashflow anything we've ever come across. I also think it's more valuable to think of the big picture for savings - we don't calculate it monthly because we feel like that would be pretty inaccurate, since there are HUGE variances in both spending and income month to month. Instead we look at it over the course of a year so everything averages out.

Re: budgets when one person isn't totally visible, a lot of people find cash in envelopes works well for that. Take out you $650 for groceries at the beginning of them month, stick it in an envelope marked "Groceries", and only spend from that. Personally, my boyfriend is an authorized user my credit cards and uses those, which I have connected to Mint. Super easy.

When we get groceries and non-groceries at the same store, we just ring them up as separate transaction. Tons of other people seem to do this at Costco (probably to separate business and personal items if they own a restaurant or something), so nobody will look at you funny or anything.

[YK-Phil]

As someone who spends his time between Calgary and Yellowknife, both HCOL locales, I think some of your monthly expenses need to be seriously scrutinized. The first thing that jumps to my face is that you spend almost 50% of your net income on Shopping ($1000), Restaurants ($500), Misc. ($450), Groceries ($650), and Entertainment ($400). Compared to my own budget (wife and me) which is pretty similar to Zikoris', I would probably slash your groceries budget by at least 50%, shrink your restaurant and entertainment spending to a generous $100 for each category, and completely eliminate the extravagant miscellaneous spending altogether.

[Cornelia]

As someone who lived in Vancity for five years, I totally echo what has been said already. I also encourage you to move to a lower-priced neighbourhood. Are you right down town? If so, why are you taking cabs? Are you in a swanky area like Kitts?

I lived in Marpole (as far as you can get without living in richmond), and loved it. It was such a family friendly place, every thing within walking distance (bank, grocery, restaurants, library), on a main bus route, and much cheaper than most other areas. I paid $750 for a two bedroom basement apt with our own w/d.

[FrzenStache]

Grocery buying has been ad hoc for quite a while, SO’s penchant for fancy cheeses and organic grocery deliveries certainly inflate those costs.   We’re starting to coordinate more for this category (and stop the organic deliveries), so we’ll see how much improvement is made this month.

We’re located in the Brentwood area to minimize commute times to central Burnaby and downtown, and stay relatively close to family on the North Shore.  When the lease is up in the fall we’ll probably look for a cheaper 1 bedroom that’s still fairly central for us and close to the skytrain (east van, north or central Burnaby) and closer to $1200.  We’ve had awful experiences with basement suites in the past so that is not in the cards at this point.

A lot of the excess spending in restaurants, entertainment and shopping is influenced by SO’s spendy friends, a big challenge has been finding cheaper activities than nights out downtown that everyone can agree to.  Reducing all this discretionary spending has been discussed, but will take some time to gradually reduce as I get more buy-in from SO.

Going to start implementing that Costco idea asap, for overall and category spending we are going to start a monthly review of expenses to see where the greatest savings opportunity lies.  Slashing everything by 50% overnight isn’t realistic, but 10% reductions over the next few months are certainly doable.

Thanks for all the facepunches so far, it’s great to hear that other people have had success being mustachian in Vancouver.

[YK-Phil]

We too struggle with our restaurant budget. While my wife and I prefer to cook at home, our younger friends (especially those in their late 20s and early 30s) are big on eating out several times a week, if not every other day. What makes it more difficult is that I spend six weeks away for work, so when I come home for my two weeks off, it's non-stop invitations to go out for dinner, drinks, coffee, etc. which wreak havoc on our normally frugal lifestyle. Hopefully this will end next year after we move to our semi-retirement retreat in the Gulf Islands.

[RetiredAt63]

Good pun in the title  ;-)