Surviving On Little To No Retirement Savings
Estimated reading time: 18 minutes
Consider today what little to no retirement savings might mean for your future as you grow older, as it may mean living on far less.
No Retirement Savings Can Be Stressful
If you’re tired of hearing about how much money you should have in your retirement savings and want to hide because you’re not part of this elite group of savers- you’re not alone.
Company pensions, particularly defined pension plans, are becoming a perk of the past.
Canadians are left with few options for retiring without living the rest of their years poking through a tight budget.
I’d love to retire early, but since the birth of our son, we’ve seen our life goals change significantly.
We were content living mortgage free in our house and happily ever after.
Now we are talking about buying a bigger house to have more room for our son to run around, along with an in-ground pool.
That means we’ll need to save even more money if we hope to pay cash for the next house or face added mortgage loan debt again.
Related: Retiring Early Should Never Be Expected
I received an email from a reader asking me about his retirement savings and how he was supposed to pay himself first when he couldn’t even afford the bills.
He went on to say that the only people who can afford retirement savings are the budget wealthy and that it’s depressing.
He’s not alone in his plight regarding future savings because everyone feels the financial pressures to firm up.
Related: What should your retirement savings plan look like?
Canada Pension Plan Increase
The current Canadian Pension Plan (CPP) savings of 4.95% will gradually increase between 2019-2025 to 5.95% percent to help fund higher benefits.
That means that if you earn $54,000 a year, you will see monthly premium increases of about $9 in 2019, finishing at around $43 a month once fully phased in, according to a Globe and Mail article.
An expanded CPP is designed to address the shortfall in middle-income retirement planning that is opening up as a result of disappearing corporate pensions.
Most at risk are workers under the age of 45 with middling incomes – say, families earning about $50,000 to $80,000 a year.
Without the defined-benefit pensions that their parents enjoyed, many could hit retirement with little in savings.
– Globe and Mail Article
Your retirement savings may not be a big deal to you right now, especially if you are working, but come time to retire; you’ll wish you had started earlier.
We often hear that people don’t care about putting in the effort for savings because it’s easier to believe that the government will help them over the hurdle.
Related: Worry about your financial future now and not when you retire
This is a reality for many Canadians because their options regarding extra cash to pay themselves are limited.
First, time is not on their side, or they don’t believe in the retirement savings system.
It’s far easier to throw your hands up and put your financial future in the hands of the real estate market and current CPP.
Without a crystal ball, it’s hard to say whether the financial impact these two options will have for retirees.
Helping Canadians With Little To No Retirement Savings
In a way, it’s easy to see why the government will increase the CPP as they don’t want generations of people living in poverty.
CPP increases will benefit the young who have time to grow their investments.
However, those who don’t qualify or older people will continue to feel the poverty crunch of retirement without retirement savings.
It’s not unusual to see older people continue working as long as possible to make ends meet.
We can expect to live on a tight budget with little to no retirement savings.
Also, consider possibly downsizing if you live in a home to cash in on any equity you’ve built to boost your income.
No Turning Back The Clock
My parents in the UK rely on their rental houses as income for retirement, in part with the government pension.
If they could turn back time, they’d do things differently even though the houses are paid in full, and they earn a bit more money now than they did working.
They still live a frugal lifestyle because anything can happen in real estate until they sell their houses.
Ultimately though, there is the point where we sit at a table and present ourselves as the future we worked for to get us to that point.
For some, it may be bleak,, but for others, you’ll have little to no worry about celebrating the rest of your life stress-free financially.
Related: CPP Reform: We Can’t Afford Not To Make These Changes
Whether you are opposed to ongoing CPP changes, others would rather invest the money and watch it grow at the hands of an advisor or crush the market with their investing skills.
CPP Changing For Canadians
The Canada Pension Plan (CPP) is changing to better reflect how Canadians choose to live, work, and retire.
The Government of Canada is adapting the CPP to ensure it remains fair and sustainable, and that it responds to the evolving needs of Canada’s aging population and to changes in the economy and labour market.
The changes, which the Government will gradually introduce from 2011 to 2016, will give you more options so that you can make decisions that are right for you as you make the transition from work to retirement.
Source– Service Canada Public Pensions
Start Investing Today
It’s never too late for retirement savings, whether investing it in a TFSA or topping up your RRSP every year.
This year will bring me to the final stages of catching up with RRSP contributions since I landed in Canada as a permanent resident.
I never quite earned enough money to invest in retirement savings when working in Canada.
Since I earn over $40,000 a year, I will benefit from catching up.
As a newly landed immigrant to Canada, most would say I’m still young at age 40.
I’m only left with 25 years of CPP and retirement savings potential, and that’s pushing the envelope.
Most often, I turn to older people who are retired and have much to say about what they wish they had done when they were younger.
Related: Senior shares trick to saving for Retirement in three words
There are no plans to rely on any pension from the UK, so I must take matters into my own hands.
I’m just as nervous about having enough money for our family come retirement, especially since I am the sole income earner in our household.
Investing In Retirement Savings
When I hear that people struggle to invest even $100 a month I ask them what they can cut from their budget to make this happen.
Most often, I hear that there is nothing that they can cut, and if that’s the case, if able, it’s critical to earn more income.
Related: Saving for retirement on a lower-income
Earn More Money To Increase Investment Power
That may mean a second job to make ends meet, which includes paying yourself first.
Relying on personal retirement savings will always benefit you more than playing roulette with the Canadian Pension Plan.
Using your house as retirement collateral for downsizing is not always the best option.
Discussion: How important are retirement savings to you?
June Income Report
In June, we paid yet another extortionate electricity and water bill.
We conscientiously put the washing machine on at 7 pm.
The air conditioning also goes on after 7 pm and every other high-draw equipment.
Even though we do as much as possible to reduce our energy consumption during peak hours, we still have high bills. I can only imagine what some people are paying.
The city taxes came due, which was quite a large chunk of our monthly expenses at over $1,000.
The rest of the expenses were fairly standard monthly bills; however, we spent more than normal on the secondhand category, the Kijiji/garage sale section.
We managed to find Junior a bargain outdoor play set, though admittedly, it did require a little help from me to restore it to its former glory.
Junior is happy with it, and that’s what matters.
Pick A Budget That’s Right For You
I’m currently offering 2 versions of our budget, and the reason behind it is simple.
Firstly, read the CBB blog disclaimer because what you do with it is your own business, so if you mess it up, you need to sort that out.
I have not closed off any cells, so you can make all the changes you like to the budget to reflect your lifestyle, which you asked me for in your emails. (See, I do listen and read your comments and emails)
Although I would love to help every fan with their budget, I cannot do so, but I am always willing to answer any emails you send me, so don’t be shy.
This was, after all, meant to be our budget, and although I would love to customize it for every fan that wants to use it, I’m afraid I cannot.
I’m not selling this budget or hoping to make any money from it, so enjoy this free budget, and I hope it works for you as much as it does for us.
Free Budget Spreadsheet
You can download the free budget spreadsheets here.
- Budget 1– You can use the pre-existing categories or your own if you wish, and you can use projected expenses.
- Please read all notes left around the budget for tips.
- Budget 2– Everything is pre-set, so you have to use the pre-defined categories, but this budget will generate year-end budget figures where the other one won’t, but you must use the categories already in this budget.
- If you change anything, you will mess up the formulas and year-end figures.
- Please read all notes left around the budget for tips.
Test the budget for a month and see how it goes.
Our Family Budget Plan
How do we budget our monthly expenses?
Fans often ask me how to budget money on a low income.
Some readers have a high debt load, like Tony who got rid of over $100,000 worth of debt by using a budget.
CBB fans want to know what we do to save so much money, and my reply is simple>> It’s not about the money. It’s about the process involved.
We are both money managers of our finances and with our relationship compatibility, we have been able to get to where we are in 2016, debt free.
It doesn’t matter if you are using a cash-only budget or if you use your debit and credit cards.
If your budget doesn’t balance, you have budget issues; you should check it pronto.
Learning to be your money manager is important because no one else will care about your money more than YOU!
We don’t always save as much money as we would like every month.
Most importantly, we are not going into debt, but only because we are budgeting our money.
We are currently debt-free, including the mortgage, which means all we pay for is our monthly bills and expenses.
Never Give Up On Budgeting
One of the most important things we did for our finances was that we never let the budget deter us from reaching our goals.
Sure, we’ve had crap months, but we’ve made up for it or learned from our mistakes just like we should.
Budget failure only occurs when you give up on your budget, which should not happen as long as you truly want to reach your goals.
We didn’t always earn the income we do today but made do with what we were earning, so we didn’t go into debt.
That, my friends, is called “living below your means, which is the only science to becoming rich!
Budgeting In Other Countries
Sometimes fans email and ask me if living on a budget in Canada is any different from living and budgeting in other countries.
To be honest, I’m going to say probably not.
If I still lived in the UK, I could use this exact budget spreadsheet to meet all of my needs; however, the budget needs to be reviewed monthly.
Below are links to the budgeting series I wrote while designing our Excel budget spreadsheet, which will give you an idea of how we designed our budget.
I’m not a financial planner/advisor, so I can’t tell you how you should budget, but I can show you how we budget.
Like everyone else, I’m just a regular guy; some might call me a budget or numbers nerd.
Learn How To Budget With Mr.CBB.
Our Budgeting Series
Do you want to learn to budget like we do?
This mini-series below explain everything we do and more about budgeting.
Please take the time to read through our budgeting series, plus read Budgeting in the New Year.
I hope the information will help stop you from making common budgeting mistakes.
- How We Designed Our Budget Step 1– Gathering All the information
- How We Designed Our Budget Step 2– Budget Categories
- How We Designed Our Budget Step 3– Tracking Receipts
- How We Designed Our Budget Step 4- Note-taking
- How We Designed Our Budget Step 5– 5S Organization
- How We Designed Our Budget Step 6– Who Does What and When?
- How We Designed Our Budget Step 7– Balancing Our Budget
- How We Designed Our Budget Step 8– Knowing our Coupon Savings
- How We Designed Our Budget Step 9– Reading Our Bills
- How We Designed Our Budget Step 10– Projected Expenses
Budget Percentages June 2016
Our savings of 33.79% include savings and investments and emergency savings for this month.
If you include the projected expense savings, we saved 57.12% of our income.
That’s $4695.30 going into savings or investments of some description.
The monthly total comes to 100%, which shows that we spent our income this month and used the rest as emergency savings.
The other categories were well within the defined percentage limits. Our projected expenses this month is at 23.33%.
Budget Percentages Month By Month
Breaking Down Expenses
This is simply a breakdown of our expenses, which has helped us understand where all our money goes.
Since May 2014, we have been mortgage-free, so much of our money will be directed at savings, investments, and renovations.
I appreciate that you enjoy this budget update each month.
Still, I hope you view this as an educational tool rather than comparing your financial numbers, as our situations are all unique.
We are hardly out of the clear with finances for the rest of our lives and have worked and sacrificed to get where we are.
We do plan to enjoy the money we’ve saved now since we haven’t over the years with our son.
What we do with our “extra cash” is our business, and although we donate to a charity, we won’t be putting it on display for the world to see as it defeats the purpose in my eyes.
It is part of the budget as you see it.
I hope that clears that up for those of you who had concerns about our extra money.
Almost 8 years ago, I started working in Canada, making a bit over minimum wage, and have since moved up the ladder.
I’m working hard to secure my dream job with one foot in the door.
We aren’t all lucky, but if you do your best, you can look back and say you gave it a shot.
Sometimes we wish we had more money to budget with but understand that we only have what we earn, and if we want more, we need to earn more.
Easiest Way To Pay Down Debt
Spending less than we earn and budgeting our money has been the easiest way for us to pay down debt and save money.
- Chequing– This is the bank account from which all of our debt is paid.
- Emergency Savings Account– This is a high-interest savings account.
- Regular Savings Account– This savings account holds our projected expenses.
- Monthly Budgeted Total: $5093.64
- Monthly Net Income Total: $8220.07
- (Check out our Ultimate Grocery Guide to see where our grocery money goes)
- Projected Expenses: These are expenses we know we will pay for throughout the year = $1917.68
- Total Expenses Paid Out: $4778.52
- Total Expenses Paid Out: Calculated is $8220.07 (total net monthly income) – $1,917.68 (projected expenses) – $1523.87 (emergency savings) = $4778.52
- Actual Cash Savings going into Emergency Savings: Calculated is $8220.07 (total monthly net income) – $4778.52 (actual expenses paid out for the month) – $1917.68 (projected expenses) = $1523.87
Saving For Future Expenses
What are Projected Expenses? – We project expenses throughout the year so we have the money saved.
PE= A projected expense is money automatically saved each month so it is ready when the bill comes in or when you need it, as in the example below.
We review our projected expenses at the beginning of the year to set up our yearly budget and adjust as we go along if a new projected expense arises and needs to be added to the budget.
Sometimes we remove a projected expense as well, so monitoring your expenses is very important.
This has happened many times, but it’s bound to happen as we can’t predict everything we must pay for over the year.
The important part for us is that we are saving for these expenses, and we no longer have to stress about taking money from our savings to pay for them.
What Are Projected Expenses?
Read Step 10 in my budgeting series to learn more about projected expenses.
When we spend the money in a projected expense category, we move that money to our chequing account to pay for that incoming expense.
So this means the numbers go up and down in the projected expenses account based on what we need to pay for what we saved for in the account over time.
You only need to track your projected expenses each month manually as I can’t customize that for you in the Excel budget spreadsheet as I don’t know what you will use for projected expenses.
For now, we will have to track, which means month after month manually.
We add up what we save in each projected expense category and minus what we spend to know how much we have and what is left in each category.
I have updated our personal Excel budget spreadsheet for 2016.
We pay money into the projected expenses account continually throughout the year.
Even when bills come due as it’s revolving, as one bill gets paid, the money continues to come in from the other categories all year.
This ensures that money is always available.
It may not always be enough, but having something ready is better than having nothing at all and having to use credit.
So the $1917.68 gets paid into the projected expense account every month, no matter what.
It seems easier to track our money this way, but you can do what works best for you.
Sample Projected Expense
If our clothing category were a projected expense, we would have a budget of $50 per month for the two of us.
If we spend $30 on clothes for the month, we need to pull $30 from the projected expenses account to pay for this expense.
We move only $20 to projected monthly expenses and leave the $30 in a chequing account.
I plan to create a projected expenses spreadsheet to track the expenses all year long.
Otherwise, it would be best if you did it manually, which we currently do, to ensure we don’t overspend what we haven’t saved or will save over the year.
It’s a fairly easy process and becomes a lifestyle change for your finances, but the most important part is that the money is available and saved, potentially less stress.
This means we should have $600.00 per year for clothing to spend.
Hopefully, for our 2015 budget, I can incorporate that into our spreadsheet so it tallies the numbers up as we go along.
That way, we can know exactly what we’ve spent as an ongoing total.
(Note: I am working on this but slowly as I wasn’t anticipating all the extra hours with my second job)
Budget Results
Time for the juicy category numbers and to see how we made out with our monthly budget.
Below you will see two tables, one is our monthly budget, and the other is our actual budget for June 2016.
This budget represents 2 adults and a toddler plus our investments.
If it is highlighted in blue, it is a projected expense.
You will also see our budget does not include the emergency savings as this is factored in at the end.
Budget for JUNE 2016
Actual budget expenses for JUNE 2016
In June, I also fixed up a bike we got for free so that I could ride with our son on the back.
The back toddler seat was brand new and generously donated to us.
I did purchase new rims and tires for the bike to the tune of about $70, which was a small investment for some great times with the boy.
Budget Updates Month By Month
In case you missed our budget updates and want to do a quick search, I’ve compiled them on one handy page: monthly budgets.
For the 2016 Year, I will also keep track of each month below and update the monthly budgets page.
That’s all for this month. Check back at the beginning of August 2016 to see how we made out with our July 2016 budget.
Happy Budgeting CBB’ers!
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