Stop The Bleeding

-Written by Cel and Steph

Suppose you saw someone with a knife stuck in their chest.  Then you saw them pull out a bandage and apply it to their finger.  You ask them what the hell they are doing and they reply that they’re bandaging up a paper cut.  You’d probably think they had strange priorities and were at serious risk of death by blood loss.

Somehow, this is exactly what many people do when they attempt to “stem the bleeding” of their spending habits.  They will cut out the $20 a month on chocolate bars, but continue to pay 45% of their take-home income on rent.  They’ll make their own coffee instead of going to Starbucks, while having a $400 a month car payment (not for gas, or insurance, just the payment).

This is not hypothetical – people have told us directly that they spend close to half their take-home pay on car-related expenses, or 60% on rent (fortunately, not the same people).

For most people, the knife in the chest is the big three – housing, transportation, and food.  If you don’t have a handle on these categories, it doesn’t matter how many coffees you don’t drink or movies you don’t watch – you’ll never become financially independent.

Let’s start with housing.  We did an earlier post about housing in Vancouver: https://incomingassets.wordpress.com/2013/12/31/housing-in-vancouver/

Basically, you should not be paying more than 30% of your take-home on housing – at the most.  Ideally, it would be under 20% – which is quite feasible depending on income and living situation.  We pay an average of 16.3% of our take-home on rent.

Be somewhat open-minded in regards to your living situation.  If you insist on only living in a high-rise apartment with a concierge, you had better have the paycheck to afford it.  Don’t buy property if renting is a better option (which it often can be, particularly in higher-cost areas such as Vancouver).

If you are single, be open to the idea of roommates – sharing a kitchen or bathroom might suck, but not as much as living on the street after one bad month. Consider renting suites in renovated houses – these are generally private (no shared kitchen or bath).

And a dishwasher is not worth paying 20% more rent – just do the damn dishes by hand.

Transit – we cannot stress enough to trade your car in for a bike. Now, for many people, this may be impractical. However, even those who cannot completely abstain from driving can often replace at least some car trips with biking.  Consider biking to the grocery store (install a basket on your bike).

If your car trips are relatively infrequent, look into a car co-op.

If you live in a big city like Vancouver or Toronto, a car is more of a luxury than a necessity.  You might think  you need it – but if you tried living without it for a month or two, you’d find that it is relatively easy to adapt.

The difference between owning a car, and not owning a car, is literally several years of retirement versus working.

Lastly, one of the biggest areas of bleeding is food. We know people who spend upwards of five hundred dollars a month on groceries for one person, and a few hundred on restaurants!

For perspective, we spend an average of $250 to $260 a month on food for two people ($230 groceries, $20ish a month on restaurants).

This is a relatively simple thing to fix.  Bring lunches to work instead of eating out. Prepare your meals from base ingredients rather than buying packaged meals or heavily processed food.  Meat is expensive – you don’t need to eat it at every meal, not if your grocery costs are out of control.

Cutting your cable subscription or reducing your cell phone minutes is fine in itself.  But if you aren’t dealing with the money hemorrhaging from your home, car, and fridge, you might as well be trying to stick a bandage on a gaping chest wound.

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