mdj 2016 annual expenses

Back in 2008, I wrote my initial post about our monthly expenses.  It’s always interesting going back in time to see what the circumstances were.  Back then, the update was compiled just before we had our first child, and we had a mortgage on our principal residence (a new build).  Our annual recurring outlay was around $50k (not including RRSP, savings, captial expenses etc).

Five years later in 2013, I wrote an updated post with quite a different life story.  By that point, we had two young children and we managed to pay off our mortgage a few years prior.  Even though the mortgage payments were eliminated, the kids tied up the extra cash flow and more!  At that time, child care/pre-school costs were high at around $12,000 per year (spouse working part-time).  Our total annual recurring expenses back then were around $52k (not including RRSP, RESP, TFSA contributions etc).

Fast forward to 2015 and my oldest child is in grade school and my youngest in pre-school about to start kindergarten in the fall.  Although one child is out of daycare/pre-school, there are still summer camps and activities that really add up.  We managed to keep costs fairly low spending about $53k for the year.

Now onto 2016!  Pre-school costs only consume half of the school year, the other half year is covered through kindergarten.  However, children activities in 2016 really kicked it up a couple notches which resulted in a few more swipes of the credit card (starting to see burn marks!).  The increased activities offset any savings we received from reduced pre-school fees.  I’m all for the kids going out and enjoying activities, but what I didn’t anticipate was that it would result in lifestyle inflation.

With a high number of activities and neighbors/friends going to the same location, we discovered that we were limited in carpooling opportunities (car seats take up a lot of space!).  After much discussion and debate, this frugal blogger reluctantly upgraded to a seven-seater SUV.  The details of the purchase are for another post, but we managed to buy a high-quality three-year-old SUV for about half retail price (with cash so no financing charges).  While we got a good deal on the purchase and a very fair trade-in value, it was no surprise that the large SUV increased our annual recurring expenses.  Specifically, gas and insurance.  I’m hoping though that as the kids grow out of car seats, that going back to a mid-size car/SUV (or maybe an electric vehicle) would suit any carpooling situation.

As we funnel our spending through a credit card (where possible), I use to organize transactions into categories where I pulled most of the numbers below.

Here are the numbers:

Housing Expenses: $9,867 (vs. $9,180 )

  • Mortgage: $0
  • Property tax: $3,700 (vs $3,500)
  • Maintenance: $2,500 (vs. $2,000)
  • Utilities: $2,600 (vs. $3,000)
  • Home Supplies: $1,067 (vs. $680)

Car Expenses (2 vehicles): $4,041 (vs. $3,475)

  • Car payments: $0
  • Gasoline: $2,371 (vs. $2,250)
  • Maintenance: $1,345 (vs. $900)
  • Registration: $325

Home Essentials: $1,509 (vs $1,609)

  • TV/Internet/Landline phone: $1,509
  • Cell phones: $0 (work provided cell phone)

Food and Booze: $13,000 (vs. $12,360)

  • Groceries: $11,500 (vs. $11,000)
  • Entertainment/Eating Out: $1,500 (vs. $1,360)

Insurance: $5,780 (vs. $5,130)

Children: $11,500 (vs. $11,700)

  • Preschool: $3,500
  • Activities/summer camp:  $8,000

Spending: $5,100 (vs. $4,500)

  • Shopping/clothing/hair/gym/misc: $5,100

Other Expenses: $6,200 (vs. $5,160)

  • Charity: $2,400 (vs. $2,360)
  • Gifts: $2,300 (vs. $2,000)
  • Health care (prescriptions, eyecare, dentist): $1,500 (vs $800)

Total Annual Expense: $56,997 (vs. $53,114)

As you can see from the numbers, it’s a bit of a jump in expenses since the 2015 update.  The culprits seem to be spread evenly throughout the list, but big jumps for insurance, car expenses, and other expenses.  I’m hoping this lifestyle inflation doesn’t last too long where I’d actually like to see some lifestyle deflation in the coming years.  Especially since I’m planning on reaching financial freedom in 3.5 years!

While the ideal situation would have all of our costs included in the $57k annual number, unfortunately, that is not true.  It does not include a family vacation, large capital expenses, or savings via TFSA, RRSP, RESP.  So realistically, our annual expense number is much higher.

So what does your budget look like compared to mine?

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  1. Leo T. Ly @ on June 26, 2017 at 9:16 am

    It’s great that you are able to keep the expenses that you are able to control pretty stable. I find that uncontrollable expenses such as utility rates, property taxes, cost of home improvement materials and a whole laundry list of items that I am struggling to keep them from rising quicker than my income.

    I think that if our income during our financial independence years are not growing at least the same rate our own lifestyle’s inflation, we may be in trouble. However, knowing that you are able to build a great list of dividend income assets, I think that you would probably be able to continue to grow your passive income at that rate.

  2. BK on June 26, 2017 at 9:37 am

    Our 2016 expenses are still under $50K for a family of five. We run a pretty lean household, but I do see our two-car set up as something that could be trimmed but yet we are hesitant to do so. Most of the time one car just sits. The cost of insurance/repairs/registration is probably costing around $2k/year, so the amount is not trivial, but our eldest child will be learning to drive in a year.

    Our biggest expense, like yours, is in the food category. Even though we don’t drink or eat out very much we do tend to buy better quality food, and with three children in their teenage years, you can understand why it’s the biggest expense.

  3. rgz on June 26, 2017 at 1:02 pm

    You listed car payments as $0 but didn’t list any depreciation. Your estimate is clearly low as a result.

    • BK on June 27, 2017 at 9:57 am

      I don’t think anyone tracking household expenses is going to factor in depreciation of an asset like a car. People do it because it gives them a detail report of where the spending goes, and if necessary, where to cut back. Depreciation of the value of a car is totally useless in this regard.

      • nobleea on June 27, 2017 at 11:59 am

        Depreciation is a non-cash expense. It should be tracked in a net worth statement, but not necessarily in a expenditure tracking sheet. FT is tracking and commenting on cash outlays, in which case depreciation does not count.

  4. Al on June 26, 2017 at 2:09 pm

    This is one area of my family’s finances I am pretty lax on. We live a modest lifestyle, drive used cars, have a house that’s 1/2 our annual income, shop at costco etc. We do spend what seems like “a lot” on discretionary things – furniture, home renos etc but when put in the context of annual income they’re not insane.

    I feel like I should “take it to the next level” and start keeping track of expenses, sadly I never have cause our income was always so much more than what we were spending.

  5. Tawcan on June 26, 2017 at 3:38 pm

    It’s great to see annual expenses from a fellow Canadian blogger. You see a lot of these expense reports from US bloggers but it’s not apple to apple comparison. I think cost of living for us Canadians is generally a bit higher than the US.

    For us we spent a total of $44,138.77 in 2016 (not including business expenses) which I analyzed in this post
    This number is a bit lower than our previous years. With 2 growing kids hopefully we can keep the expenses in check this year.

    • FT on June 26, 2017 at 7:44 pm

      $44k and you live in Vancouver with two kids? You guys really put us to shame! Do you have any vehicles? What are the biggest differences between your budget and mine?

      • Tawcan on June 26, 2017 at 8:33 pm

        We have one vehicle that I typically take to go to work. My wife try walking or taking the bus to places. Funny you said that because when I compare our expenses to other American bloggers our numbers seem very high (I guess I did not take exchange rate into consideration).

        Just comparing your numbers against ours…. ours are lower in..
        -Car gas
        -Preschool & activities (I’m sure that’ll go up a bit once kids are older)
        -TV/Internet/landline phone
        -We spend a bit less on food than you. We have been growing produces in the yard though.
        -Health care, work’s extended health covers most of the health care expenses we have

  6. Freedom 40 on June 27, 2017 at 10:14 am

    Your expenses are very similar to ours. Low 50’s with no mortgage. Living in Southern Ontario. Biggest “discretionary” cost is the Misc Spending (house, gifts, booze, restaurants, etc) and Kid cost (care, camps, sports). MMM would suggest that these are senseless and you should live on $30k, however the MDJ lifestyle is far more reasonable/realistic. I’m now 40 with approx $1.2M (split evenly between real estate and investments), however I don’t feel much closer to FI. My dividends only yield $15-$20k annually, but like you, I need $50k for a reasonable lifestyle. Getting my dividends up to where they need to be feels un-achievable in the short/mid term. Hoping that $1M (non real estate) at age 45 will get me there.

    • FT on July 3, 2017 at 8:15 am

      Freedom40, also note that $30kUSD should be converted to CAD. :) But I’m with you, I like the more balanced approach. Sounds like you are doing very well financially. Question, are you generating much cash flow from the $600k in real estate?

  7. Passivecanadianincome on June 28, 2017 at 11:45 pm

    Nice list. While I don’t find our son costs much atm it’s scary to think about future expenses when he cares about brands. 8k for activities and summer camp that sounds high. What activities are they in?

    • FT on July 2, 2017 at 3:28 pm

      The kids are in quite a few activities, but the priciest is probably private piano lessons. It costs $2,200/year which covers both kids. My kids aren’t in hockey, but I’ve been told that it costs $1,800/year plus any extra camps that you do, plus hockey equipment. This doesn’t include any travel that is required. Activities really add up, especially if they get serious and start going multiple times a week.

  8. David on June 30, 2017 at 12:30 pm

    This is the first year I’m actively tracking my expenses. I’ve always been someone who just pays himself first and I save a large portion of my income. However, looking at the FIRE community, I thought it best to figure out exactly how much I spend so I know when I can reitre early if I wish.

    I guessed prior to the process what my expenses are and I’m now estimated to be about 50% higher than that. It will still be less than $30,000 a year, but it is surprising where your money goes. I’m actively not trying to cut back anything, just listing it. At the end of the year I can figure out if I want to cut anything.

    • FT on July 3, 2017 at 8:12 am

      Hi David, what are you using to track your expenses? Are you using an online program that tracks credit card spending? What age are you going to call it quits?

  9. Bhramar on July 17, 2017 at 1:10 am

    Your blog was one of the first blogs I came across when I started researching about investment options and other personal finance related items in Canada. Thanks for all the excellent blog posts.

    Along with my wife and daughter (she is four now) I moved from a small Mid-West US town to Canada (Vancouver) in Sep, 2016. We have been tracking our expenses in US since 2014 and recently finished reviewing our expenses in Canada for 2017 Jan-Jun period. Here is the average monthly expenses breakdown –

    Canada (CAD 5,355/per month or CAD 64,260/year) –
    Housing (2 Bed/2 Bath Condo Rent + BC Hydro + Internet): $1800 (34% of total expense)
    Recreation & Travel: $1250 (23%)
    Daycare: $850 (16%)
    Grocery: $400 (7%)
    Car (Gas + Insurance): $380 (7%)
    Misc. Expenses + Shopping: $335 (6%)
    Eat-outs/Restaurants: $170 (3%)
    Charity: $125 (2%)
    Phone: $45 (1%)

    US (USD 4,310/ per month or USD 51,720/year) –
    Below is expense by category and % of total
    Housing (2 Bed 2 Bath Townhouse Rent + Utilities + Internet): $1030 (24% of total expense)
    Recreation & Travel: $1000 (23%)
    Daycare: $950 (22%)
    Misc. Expenses + Shopping: $490 (11%)
    Grocery: $310 (7%)
    Car (Gas + Insurance): $200 (5%)
    Eat-outs/Restaurants: $155 (4%)
    Charity: $130 (3%)
    Phone: $45 (1%)

    Housing, Car Insurance cost increased for us in Canada, but daycare is relatively cheaper than where we lived in US. We have made some other minor adjustments but overall expenses have remained at the same level at least at the current exchange rate. Savings rate though is lower for us in Canada than US, mainly because of relatively lower income (around 20% lower).

    • FT on July 17, 2017 at 10:34 am

      Thanks for the kind feedback Bhramar. It’s interesting to see the differences in cost when comparing U.S vs Canada.

  10. Chrissy on September 17, 2017 at 3:42 pm

    I’ve come across your site many times when Googling various Canadian finance topics (clearly your site is an amazing, broad resource!) But I really realized I needed to follow you when I saw your presentation on the Canadian Financial Summit.

    I’ve been looking for other Canadian FIRE folks, particularly for some barometer to measure our spending against. As others have mentioned, MMM and other US bloggers are great, but it’s difficult to translate that to CAD spending.

    Thank you for sharing your spending breakdowns. We’re also a family of four (two boys are aged 12 and 9.) I’m so comforted to know that our very similar lifestyle here in pricey North Vancouver, BC is very similar in cost to yours. We’re mortgage-free, and our annual core spending is about $45,000. When we add in travel and saving for large capital expenditures, it’s closer to $55,000. But like you, I feel I’d rather save for a larger cushion of $60,000/year.

    • FT on September 17, 2017 at 3:51 pm

      Hi Chrissy, thanks for the kind feedback! It has been quite a journey so far and having fun along the way .

      Tell me more about your journey Chrissy . How far along are you in your financial freedom journey? What is your strategy ? Investment strategy ?

      • Chrissy on September 17, 2017 at 8:14 pm

        Hi FT!

        Being able to converse with you and read other Canadians’ comments through your blog has helped me realize I’ve been spending way too much time on US personal finance blogs. This is such a breath of fresh air, to be able to talk on a level playing field! Anyway, here’s my reply to your reply:

        We live a pretty mainstream life, but always maintained a high savings rate and paid off our mortgage in 2013. Our FIRE journey didn’t begin until 2014 when I discovered MMM. That’s when I threw myself into learning about DIY ETF investing and how to save 50%+ of our income.

        At $650,000 in investments (I don’t count home equity in that number), we’re not quite halfway to our goal of 25x our annual spending of $60,000. Our savings rate is about 55-65%, and we have another 7 years or so of saving before we reach financial independence.

        I invest mostly using a Canadian Couch Potato strategy, with a tilt to small-cap value. I use low-cost CCP-recommended ETFs, including US-listed ETFs, and use Norbert’s Gambit to exchange my CAD. I use Questrade because ETFs are free to buy and cheap to sell (if the need arises.) I’ve been very happy with their service.

        We’re currently at 90/10 equity/bonds, but I’m very close to pulling the trigger on going 100% equity. I’m very comfortable with risk and am waiting for the next inevitable market correction to load up on stocks while they’re on sale!

        So that, in a nutshell, is where we’re at. My dream is to start my own blog to share my journey as a stay-at-home mom who went from know-nothing investor to a full-on DIY FIRE money-nerd! I’ve already written a few articles to see if I could even do it (I did it, and it was fun!) Now I just need to muster up the courage to jump in and start!

        • FT on September 17, 2017 at 8:39 pm

          Chrissy, I was just reading your comment and thinking “she should start her own blog”. :) On top of that, congratulations on your financial success so far. With your strong savings rate, your family will be financially free in no time. It sounds like you really know your stuff, you should just go for blogging if that’s something that interests you.

          Oh, one more thing, the Canadian financial community is actually quite large and even some in the FIRE community. The best thing about reading Canadian blogs is the relevance in terms of tax, investment strategies, and real estate.

          • Chrissy on September 17, 2017 at 8:44 pm

            Thank you, FT, for your kind words of support and encouragement. I also totally agree with you about the relevance in terms of tax, investment strategies and real estate. These are some of the things I’ve learned how to optimize, and would love to share my knowledge on. I’m not nearly as clever or well-spoken as other bloggers such as you, but I’d still love to put my experience out there so others can learn! I’ll be sure to let you know should I take the plunge and start a blog. :)

  11. FT on September 17, 2017 at 9:13 pm

    Chrissy, before starting this blog, I had very little writing experience – but writing for this blog over the years (since 2006!) has helped a lot. Let me know (via contact form) if you would like to share your story with MDJ readers. I think that we can learn a lot from your knowledge, experience, and financial goals.

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