How A Social Circle Affects Your Budget
Estimated reading time: 10 minutes
Twenty-Seven-year-old Corrine has a career and income but a social circle that drains her monthly budget.
Folks, you can’t be afraid to peddle the other way when your social circle gets out of hand.
The older you get, the wiser you will get with your time and, hopefully, your money.
Having friends is great, but having a social circle that wants you to spend money often can cause your budget to explode.
For those struggling like Corrine, it’s essential to understand that your life will change.
Table of contents
Social Circle Of Friends Don’t Always Last Forever
Have fun when you’re young but don’t put yourself in a financial position that affects your future.
Your friends won’t always be near you or in your life as much as they are when you are younger or single.
You won’t be hitting the shops or pubs as much as you do when you have a partner or family to care for.
Not everyone follows this path, but generally, life goes through stages and changes, and you are the lead actor.
Even as we age, it’s essential to have friends, but even more important to keep a roof over our heads and prepare for the future.
You’ll find other things to do with your loved ones and family.
Your social circle kind of slides into the if I can fit you in mode” or “when we both have time” because life happens.
Friends are essential, but there are other ways to see your friends and have fun without spending much money.
Like most people, when I was working full-time, my friends wanted to forget about the day or even the week that had just passed.
We frequently went to the pub for a pint of beer, dining out, or general shopping in the village.
There’s no shortage of things to do when you want to blow off steam and have fun.
When your social circle is too social, you must say no or find ways to be frugal.
Let’s look at Corrine’s email and see what’s happening with her budget and how her social circle affects her life.
(Name has been changed to protect her privacy)
My Social Circle Is Eating Into My Budget
Dear Mr. CBB,
My name is Corrine, I’m 27, in a new relationship, and I live in Toronto, Ontario, where I’ve lived for over two years.
I came from a small Ontario town where finding things to do meant helping my parents pick fruit on our farm or attending the local community dances when I was younger.
When I went to University, I found that my social circle expanded, and my friends wanted to hang out after classes, so we’d go shopping.
The mall was next to the University, so spending money wasn’t too hard.
That was one of my downfalls when I moved away from home, using my credit card to create debt.
It took me three years to pay off my credit card debt after University, and now I’m debt free apart from paying back my student loan, which is approximately $24,000.
I’ve paid nearly $50,000 over the past few years by using a budget and watching where my money is going.
My monthly rent in Toronto is $2200 for a 2-bedroom condo plus some utilities and parking, including a gym and pool.
This is fine for now since I earn $90,000 a year and hope to see my income increase.
In my budget, I give myself $200 a month, which includes eating out.
Retirement Savings and Condo Downpayment
The problem is that I have just started saving for retirement and down payment for a condo because I want out of the rental market as soon as possible.
My friends want to go out often, so my phone is ringing, and texts flood throughout the day.
If it’s not to the spa to get our hair and nails done, it’s shopping for clothes at high-end stores, nightclubs, concerts, and fancy restaurants.
You name it, and they want to do it because it’s about having fun and potentially falling in love.
We have been good friends since University, but my social circle has forced me to spend more than I can afford.
Now that I’m in a relationship, I’m finding it hard to even be with my friends as much as I used to.
I don’t know how to back away without limiting my expenses or burning bridges within my social circle.
I thought maybe my budget was out of whack, so I thought perhaps you could take a look at it for me and see if there was a way I could balance it better.
I’m also hoping for insight into how I can keep everyone happy, most importantly, myself.
Thanks for any help.
Corrine.
Toronto, Ontario.
Corrine’s Monthly Budget
Income $90,000/year or $5500 net a month (approx)
If you make $90,000 a year living in the region of Ontario, Canada, you will be taxed $23,724.
That means your net pay will be $66,276 yearly or $5,523 monthly.
Your average tax rate is 26.36%, and your marginal tax rate is 39.31%.
If you’re unsure how much money you will net each month or year, use the Income Tax Calculator posted on my Free Downloads Page.
I’ve adjusted figures for her net income as she wasn’t sure, so I’ve gone over the process to find out as described above so she can add this to her budget.
Knowing your exact take-home pay or average, if you are paid monthly, bi-weekly, weekly, or have an irregular income, is vital to a successful budget.
$5500- $200 to the employer for retirement $5300
Budget Breakdown
Anything she does not spend is saved for future expenses and goes into a projected expenses bank account.
- Condo Rent is $2200, including gym and pool on site
- Utilities $300
- Student Loan repayment of $300 per month
- Rental insurance is $25 per month
- Car insurance is $120/per month
- Life Insurance $85/month
- Groceries $200/month
- Phone $150
- Transportation is $500, including parking, gas, stickers, maintenance, etc. (excess saved and the car is paid for)
- Clothing $100
- Eating out/Entertainment, including coffee dates, etc., $250
- Investments $500 part TFSA part RRSP (employer takes $200 a month for retirement savings matching plan)
- Hobbies for $100 include Volleyball, Reading, and Painting.
- Health and Beauty $100 includes any prescriptions not covered
- Savings $200 This is for emergencies or a down payment for a condo.
- Gifts (includes birthdays, Christmas, and Holiday $50 per month saved or spent
- Work Memberships $20 per month they were saved.
Total Budgeted $5200
This leaves her approx$100 a month from her net of $5300.
Social Circle And Budget Review
Hi Corrine,
After looking at the budget figures you sent me and your approximate net income, I would suggest a few things.
First, you need to learn to say NO to your social circle.
How about sitting down with them and discussing fun things that cost little to no money?
I’m betting they might feel the same way you do and don’t want to hurt any feelings by declining invitations.
You may find that you can agree on ways to be frugal friends.
The $250 a month you spend on eating out and entertainment can easily be lowered, and the money put towards your student loan debt or savings.
From your budget perspective, you earn a healthy income living in Toronto.
Rent A Room For Extra Cash
If your lease doesn’t say anything about room rentals, perhaps earning some extra income with your second room may be an option if you are okay with this.
Always remember renting has pros and cons, especially if you live in the same space.
There were a couple of areas I think you can decrease your budget and increase in others.
I’d most certainly look at how much you spend eating out and your groceries.
You can easily save cash if you learn to say no, bring your coffee, or have coffee at home.
If eating out with a partner is crushing your budget, consider buying food and having a fun, romantic time at home.
Switch back and forth between each other’s residences and cook for each other.
This will save some cash.
Reduce Mobile Phone Costs
Your phone is relatively high, in my opinion, so call your provider in search of savings.
Ask the retention department what deals they have or if there are any ways to lower your monthly bill without compromising what you need.
Be Thrifty With Clothes Shopping
Clothing is important, especially if you are an office worker or need to buy uniforms for work out-of-pocket.
Going to thrift stores is the way to shop, especially for clothing and accessories.
Even if you need other things for your home or lifestyle, do it the thrifty way.
Also, you may even find painting supplies for your hobby at a second-hand shop and other things to help shave some money off your budget.
If you paint professionally (I don’t know), perhaps you can sell your services for money and make a business from it.
Make Extra Money
Earning extra cash on the side greatly boosts anyone’s income.
You can also use online savings like Rakuten Canada if you shop online to get a portion of your expenses back.
We just got our second cheque in the mail yesterday.
Hey, even a bit of saving is better than a kick in the butt, and these days, many people shop online, so why not save even more.
Increase Investment Portfolio
I know you mentioned that your employer has a Registered Retirement Savings Plan (RRSP) matching program in which you participate.
Congratulations, as many people can’t or don’t do this when offered.
Free money and forced savings for your future are significant.
If possible, I’d like to see you increase your investment savings rate, especially your RRSP.
Maximizing your retirement and then Tax-Free Savings Account is smart investing.
You may also want to talk to your financial advisor about long-term life insurance and review your current policy to ensure it fits your lifestyle.
There’s no harm in asking about the future.
Saving To Buy First Home
Owning a home is not the end, but you’ll need to save a hell of a down payment if you plan to live in Toronto.
I’m not a huge advocate of utilizing the First Time Home Buyers Plan because you still have to pay back your investments which causes a further financial burden for new homeowners.
In your case, though, it may benefit you as long as you have a budget that allows you to make appropriate repayments if you withdraw any RRSP investments.
Planning Expenses Ahead Of Time
Your projected expenses are lovely, and it was nice to see them since I have been sharing this way of saving for many years on Canadian Budget Binder.
It has helped keep us out of debt and not have to use our emergency savings to bail our bills out. Keep that up.
You Can Control Social Circle Expenses
Overall, your budget is relatively balanced apart from what I described above; however, there are many areas you can improve in.
It’s always important to visit your budget and include anything that has changed.
Many people skip this step and get overwhelmed with extra expenses that haven’t been accounted for.
Keep up the hard work; before you know it, you’ll have the money saved to get you into a new home.
P.S.- Once your student loan is paid, you’ll have an extra $300 towards your down-payment savings plan.
Thanks for your email.
Mr.CBB
Discussion: What other tips would you offer Corrine about her budget and social circle, as that is her main concern?
