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How Your Budget Is Affected By Your Social Circle

how your budget is affected by your social circle

CORRINE HAS THE CAREER AND INCOME BUT A SOCIAL CIRCLE THAT IS EATING INTO HER MONTHLY BUDGET

Here’s the thing folks, you can’t be afraid to peddle the other way when your social circle is getting out of hand. Trust me when I say that the older you get the wiser you will get with your time and hopefully your money.

It’s great to have friends but when you have a social circle of pals that want you to spend money often it can cause your budget to explode.

For those of you who find you are struggling like Corrine is (who you will read about below) it’s important to understand that your life WILL change and your friends won’t always be near you or in your life as much as they are when you are younger or single.

By this I mean you won’t be hitting up the shops or pubs as much as you do when you have a partner or family to take care of. I know I’m far-reaching with this one as 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 important to have friends but even more important to keep a roof over our heads and to prepare for what the future holds.

You’ll find other things to do with your loved one’s and family and your social circle kind of slides into the ‘if I can fit you in mode” or “when we both have time” because life happens.

YES, friends are important but there are other ways to see your friends, communicate with your friends and have fun in the process without having to spend too much if any money at all.

Like most people when I was in University and even after when I was working full-time my friends wanted to get together often to forget about the day or even the week that had just passed.

That meant we made frequent trips to the pub for a pint or two, eating out or general shopping for whatever we fancied in the village. There’s no shortage of things to do when you want to blow off some steam and just have fun.

The problem is the money and when your social circle is too social you have to either make a decision to say no or to find ways to be frugal.

Let’s have a look at Corrine’s email and see what’s happening with her budget and how her social circle is affecting 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 just over two years.

I came here from a small Ontario town where finding things to do meant helping my parents pick fruit on our farm or going to 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 it wasn’t too hard to spend money. That was one of my downfalls when I moved away from home, using my credit card to create debt.

It took me 3 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 already paid near $50,000 over the past few years by using a budget and watching where my money is going.

My rent in Toronto is $2200 a month for a 2 bedroom condo plus some utilities and parking but includes 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 spending money which includes eating out.

The problem is I have just started saving for retirement and a down-payment for a condo because I want out of the rental market as soon as possible.

My friends want to go out often which means my phone is either ringing or texts are flooding in 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 I find my social circle has been forcing 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 really don’t know how to back away without limiting my expenses or burning bridges with-in 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 it there was a way I could balance it better. I’m also hoping for some 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 that your net pay will be $66,276 per year, or $5,523 per month. Your average tax rate is 26.36% and your marginal tax rate is 39.31%.

If you’re not sure how much money you will net each month or year simply 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 went over the process for her to find out as described above so she can add this to her budget.

Knowing your exact take home pay or an average if you are paid monthly, bi-weekly, weekly or have an irregular income is vital to a successful budget.

$5500- $200 to employer for retirement $5300

Anything she does not spend goes to her savings and the money that is saved for future expenses also goes into another bank account such as our projected expenses which she follows.

  • Condo Rent $2200 includes gym and pool on site
  • Utilities $300
  • Student Loan repayment $300 month
  • Rental insurance $25 month
  • Car insurance $120/month
  • Life Insurance $85/month
  • Groceries $200/month
  • Phone $150
  • Transportation $500 including parking, gas, stickers, maintenance etc (excess saved and 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 $100 includes Volleyball, Reading, Painting
  • Health and Beauty $100 includes any prescriptions not covered
  • Savings $200 This is for emergencies or down-payment for condo
  • Gifts (includes birthday’s, Christmas, Holiday $50 month saved or spent
  • Work Memberships $20 month saved

Total Budgeted $5200

This leaves her  approx$100 a month from her net $5300.

My Budget Review and tips for her Social Circle

Hi Corrine,

After looking at the budget figures you sent me and your approximate net income there are a few things I would suggest.

First off you need to learn how to say, NO to your social circle but before you run off and do that how about sitting down with them and talking about fun things to do that cost little to no money.

I’m betting that they too might be feeling the same way you do and don’t want to hurt any feelings by declining invitations. You may find that you can come to an agreement 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 I’d say you earn a healthy income living in Toronto. If your lease doesn’t say anything about room rentals then perhaps earning some extra income with your second room may be an option if you are fine with this. Always remember renting comes with pros and cons especially if you live in the same space.

There were a couple of areas I think you can decrease in your budget and increase in others. I’d most certainly look at the amount of money you are spending eating out and your groceries. I’m betting if you learn to say no, bring your own coffee or have coffee at home you can easily save cash.

If eating out with your new partner is eating into your budget again consider buying food and having a fun, romantic time preparing it at your  place or his for a date-night in once or twice a month. This will save some cash.

Your phone is quite high in my opinion so ring up your provider and ask the retention department or sales department what deals they have or if there are any ways to lower your monthly bill without compromising what you need.

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 these days 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 from your budget. If you paint professionally (I don’t know) perhaps you can sell your services for money and make a business from it somehow. Earning extra cash on the side is a huge boost to anyone’s income.

You can also use online savings like EBATES Canada if you shop online to get a portion of your expenses back. We just got our second cheque in the mail yesterday, YAY. Hey, even a bit of savings is better than a kick in the butt and these days lots of people online shop so why not save even more.

I know you mentioned to me that your employer has a Registered Retirement Savings Plan (RRSP) matching program which you participate in. Congratulations as so many people can’t or don’t do this when it is offered. Free money and a forced savings for your future is great.

I’d like to see you increase your investment savings rate if possible especially your RRSP. Maximizing on 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 to go over your current policy to make sure it fits your lifestyle. There’s no harm in asking about the future.

Owning a home is not the end all be all but you’ll need to save a hell of a down-payment if you plan to live in Toronto and 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 further financial burden for new homeowners.

In your case though it may benefit you as long as you have a budget in place that allows for you to make appropriate repayments if you choose to withdraw any RRSP investments.

Your projected expenses is wonderful and it was nice to see 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 having to use our emergency savings to bail our bills out. Keep that up.

Overall, your budget is relatively balanced apart from what I described above however there are many areas you can improve in. It’s very important to always visit your budget and include anything that has changed in your life. Many people skip this step and get overwhelmed with extra expenses that haven’t been accounted for.

Keep up the hard work and before you know 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 to put 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 in particular as that is her main concern?

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6 Comments

    1. I noticed the comment about her high cell phone bill. I also pay $150 for my cell phone but that includes unlimited internet access. I don’t pay for a cable bill or home internet. She may be in a similar situation

  1. Id say that the cell phone bill is way too high! Also maybe think about creating a capsule wardrobe so that you dont need to spend $100 a month on clothing. Lots of great second hand finds!

  2. I think her life insurance is crazy – I’m 47 and pay $50.04 a month.
    And to have $250 for eating out but king $200 for groceries is also not anywhere near balanced IMO

    1. Hi Nicole,
      I agree with the eating out and the groceries two areas I noted she could improve. As for her life insurance if she smokes it will be higher or perhaps has a health condition that drives it up. I didn’t ask her and she didn’t offer that as I felt it was personal. Good points and thanks for sharing.

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