Finding the Cracks in Your Financial Foundation

To help homeowners free up the money to complete their renovations, House Poor host and Certified Financial Planner Suzanne Schultz starts by find the cracks in their financial foundation – the areas where their spending is causing a problem. These cracks are different for every family. Here’s a quick guide to finding – and plugging – your own financial cracks. 

Start With the Facts

Schultz has homeowners submit six months’ worth of their bank statements and credit card bills for analysis.  Each transaction is categorized by type to give Schultz an accurate picture of where they’re spending their money. You can do this at home by creating your own spreadsheet or finding one online. And while you can use only one month of expenses, the more information the better.

Add It Up

Once you’ve itemized your spending, add up the various categories to see what you’re spending on. You may be surprised at what you find when you add it all up. Some areas where people commonly under-estimate their spending are:

  • Income – any extra income aside from your regular job, such as government benefits, rental income or bonuses
  • Housing – rent or mortgage, property taxes, insurance, utilities and maintenance
  • Transportation – car payments, insurance, licensing fees, gas, parking and highway tolls and maintenance
  • Communications – cell phone, home phone, internet and cable
  • Food – groceries, restaurants and lattes
  • Entertainment – taxis, beer and liquor, health club fees, vacations
  • Kids’ Stuff – clothing, lessons and uniforms, gifts for birthday parties

Calculate Your Percentages

Use your NET income, not your gross, to help analyse the numbers. Schultz recommends that that no more than 30% of your income should go towards your mortgage. Other guidelines include 15% for transportation, 10% for savings and 15% for debt repayment. You may find that one area of your spending is significantly higher than these recommendations. As long as other areas are smaller, there’s no problem but if they’re ALL higher, it’s time to cut back.

Look for Hidden Cracks

Is paying off student loans or credit cards eating up a significant portion of your income? Do you spend hundreds in cash every month with nothing to show for it? Did a major purchase throw the rest of your budget off balance? Take into consideration your entire financial picture and be honest with yourself about where your money is really going.


Maybe you can afford it, but if you make $5,000 a month and you’re spending $1,000 in month at movies, bars and golfing, then 20% of your income is being spent on entertainment. And that’s money that you might want to spend on future plans like purchasing a home or renovating the one you already own.

Start Keeping Track

Even if you don’t limit your spending, simply writing down the amount every time you spend something will help you become more conscious about where your money’s going. You may also want to consider spending only cash, or only using your debit card rather than credit.

Make a Budget

Knowing how much of your money needs to go every month to cover your basic expenses will help you plan how much you have left for fun stuff.  By: Suzanne Schultz, CA, CFP

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