It's Your Money  

Importance of making - and sticking to - a budget

Budgeting for beginners

Living in Kelowna, nestled in the heart of British Columbia's picturesque Okanagan Valley, offers a blend of stunning natural beauty, endless outdoor recreation opportunities, and a high quality of life. It’s no wonder why so many people choose to live here.

But living here seems to cost more every day and many wonder how they can afford to do so on an “average” salary. This idea got me thinking about how a budget may look for someone earning the average Canadian salary, somewhere around $60,000 depending on which source you look at, and if they could afford to live comfortably here.

For a single person earning a salary of $60,000 per year, managing finances effectively is key to enjoying all that this area has to offer while maintaining financial stability. Let's explore a typical month in the life of such an individual and what their budget should look like:

Income breakdown: On a $60,000 annual salary, the monthly take-home pay after taxes and CPP deductions would be approximately $3,900, assuming a standard tax rate. This forms the basis of our budgeting framework for the month.

Housing Costs: Rent prices in Kelowna can vary depending on the neighbourhood and type of accommodation. A modest one-bedroom apartment in a central location might cost around $1,500 to $2,000 per month. If we take the mid-range of that and add on utilities such as electricity, water, and internet, the total housing expenses could amount to around $2,000 per month, or approximately 51% of the monthly income.

Transportation expenses: Kelowna offers a relatively compact layout, making it conducive to walking, biking, or using public transportation. However, owning a vehicle for convenience and exploring the beautiful surroundings is common. Assuming you already own a vehicle and then factoring in fuel, insurance, maintenance, and occasional parking fees, transportation expenses might average around $300 per month.

Food and groceries: Maintaining a balanced diet and enjoying the local culinary delights is essential for a fulfilling lifestyle. Allocating around $400 per month for groceries and limited dining out can provide flexibility while ensuring nutritious meals. With today’s prices, this amount can go quickly and is certainly not inclusive of regular restaurant visits.

Healthcare and insurance: Healthcare costs, including medical insurance premiums, co-pays, and prescription medications, should be factored into the budget. Setting aside $150 per month for healthcare expenses ensures adequate coverage and peace of mind. Obviously, many factors such as age and health issues could increase this amount quickly.

Household expenses: Aside from rent and utilities, and not captured in the grocery budget, there are additional household expenses that should be considered. This could be anything from buying or replacing a piece of furniture to cleaning supplies. Budgeting an additional $150 per month for other household expenses is likely a minimum amount to consider.

Entertainment and recreation: Kelowna offers an array of recreational activities, cultural events, and entertainment options to enjoy during leisure time. Setting aside around $200 per month for entertainment won’t offer a large range of options but can provide for occasional outings for socializing and exploring the city's offerings.

Savings and investments: It's crucial to prioritize savings and investments to build a secure financial future. Aim to allocate at least 15% of your (net of tax) monthly income, or $585, towards savings and investments, including retirement accounts, emergency funds, and long-term goals.

Miscellaneous expenses: Finally, it's wise to budget for miscellaneous expenses and unforeseen circumstances. After adding up all of the above amounts, this only leaves $115 per month for miscellaneous costs, such as personal grooming, gifts, clothes and other expenses.

Total Budget Summary:

• Housing: $2,000

• Transportation: $300

• Food and Groceries: $400

• Healthcare and Insurance: $150

• Household Expenses: $150

• Entertainment and Recreation: $200

• Savings and Investments: $585

• Miscellaneous Expenses: $115

As you can see above, living comfortably on a $60,000 salary in Kelowna requires careful budgeting and prioritizing expenses to align with income levels. The amount that was “left” for the miscellaneous expenses category is clearly smaller than most would like it to be.

Arguably, the easiest item to adjust here would be the amount going into savings each month since putting less away would provide more funds for other areas. But doing so would leave your retirement plans at risk.

The key here is proper budgeting and sticking to the plans that you create in order to strike a balance between securing your financial future and enjoying all that living here has to offer. Adjustments to the budget may be necessary based on individual circumstances, but with discipline and prudent financial management, living in Kelowna can be both fulfilling and financially sustainable.

Yes, I know that everyone’s situation is different, some people will have significant other expenses not listed her. This doesn’t touch on the idea of owning a home instead of renting and many other variables.

The idea of this week’s column is not to give you a budget that will be just right for your unique situation but instead to get people more open to the idea of creating a budget in the first place.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

Brett Millard is vice-president and a member of the executive leadership team at FP Canada, the national professional body for the financial planning industry. A not-for-profit organization, FP Canada works in the public interest to foster better financial health for all Canadians by leading the advancement of professional financial planning in Canada. 

He has worked in the financial advice industry for more than 15 years and is designated as a chartered investment manager (CIM) and is a certified financial planner (CFP).

He has written a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges they face in every stage of life. Enhancing the financial literacy of Canadian consumers is a top priority for Brett and his ongoing efforts as a finance writer focus on that initiative. 

Please let Brett know if you have any topics you’d like him to cover in future columns ,or if you’d like a referral to a qualified CFP professional in your area, by emailing him at [email protected].


The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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