The Budgeting Resource Everyone Has (And Nobody Uses)

Sabeena Bubber • January 12, 2016

This article was written by Sandi Martin of Spring Personal Finance and was originally published here on Spring The Blog.

Does This Sound Familiar?

You’ve read a book or a blog series or watched a show about budgeting and getting your money under control. You’re all fired up, ready to really get it together, and get to work on that budget. The first few lines are easy:

Monthly net income? Read it off the paycheque, check.

Mortgage payment? Burned in the memory, check. Oh, man. This budgeting stuff is easy.

Groceries? Uh…well, we usually shop once a week (unless we forgot something) and it usually comes in between $120-$180…I’ll put $150.

Clothing? Oh, man. I don’t know, $50? Except in September, when the kids go back to school, and October when their feet maliciously grow and we have to buy new running shoes with only one month until the snow falls…and April, when we realize it’s too warm for winter coats and too cold for sweaters…

Entertainment? Erm…let’s say $10. I dunno, do late charges at the library count?

When the time comes to “stick to the budget” and that budget is just a series of made up numbers, what happens?

Or This?

You take the advice most people are offering about controlling your spending: you begin to track your income. You get a notebook and a pen, and you write down every penny you spend, every day. Until Thursday comes along, and you’re so busy that you just keep the receipts in the book, because you know you’ll have time on Friday and you’ll remember, but Friday becomes Saturday two weeks later, and you’re sitting in front of a pile of little pieces of paper, trying to forensically reconstruct seventeen days of spending and hoping that missing the two pocketfuls of receipts that went through the wash won’t screw you up too much.

Maybe, instead of the notebook or spreadsheet, you signed up for Mint or Quicken or YNAB instead, and you faithfully input or categorize all of your spending for almost a month. And then suddenly your checking account (according to the program) has $1,315.92 in it, when your checking account (according to reality) has $541.01. And you can’t find the mistake.

When your books are a mess and you actually have no idea how closely you’ve been “sticking to the budget”, what happens?

Protip: Use What You Already Have to Start Budgeting Well

Look, these things happen, even to someone who ::cough:: has been tracking her transactions and living on a spending plan for ::coughtenyearscough:: But when one of these is your first experience with the whole budgeting thing, it can very, very easily be your last. Or your last for a while.

I truly don’t understand why the inevitable advice for first-timers is always A) write out a budget and/or B) track your spending. The only people who won’t get lost in the land of 78 spending categories and account reconciliation are the ones who probably wouldn’t have needed to read the book or watch the TV show to get themselves organized, and were going to be fine anyway.

The frustration goes away with time and practice, it really does. Any budgeting system will work if you give yourself enough time to learn and adapt to it, honestly. But why go through all the aggravation of trying to live by a guess-timated budget if you don’t have to?

If you’re convinced that some part of budgeting is worth doing, then the first place to start isn’t how you’re going to spend in the future; it’s how you’ve already spent in the past.

You have years worth of data lying dormant in your bank and credit card history as we speak – a complete picture of how you spent your money when you weren’t paying attention, and accessing it is as simple as downloading a good sample size to a spreadsheet, sorting them out, and adding them up.

Easy For Me To Say

This is one of those pieces of advice that could very easily become that “just” advice that I hate so much.

"Just" is the dirtiest four-letter word in personal finance. "Just" DIY/"Just" cook at home, etc. #CPFC15
— Sandi Martin (@SandiMartinSPF) October 18, 2015

I use spreadsheets every day (and love every minute of it) so this is an easy thing for me to do and recommend. If you don’t speak spreadsheet very fluently, this exercise might be as frustrating as trying to guess how much you’re going to spend on clothes in the next _insert arbitrary period of time here_.

But, like most things prefaced with “just”, it might be worth your time and effort to try. If you have even a passing familiarity with rows, columns, and cells, and know how to use the “sort” function, examining your past spending in aggregate is a good way to set yourself up for success with your future spending.

Why start with a guess when you can start with data?

Note: Some readers have mistakenly read this as a recommendation to use spreadsheets to track ongoing spending, to which I can only say: please don't use spreadsheets to track your spending unless you're a confirmed spreadsheet ninja. /PSA

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Finance Your Home Renovations

By Sabeena Bubber • February 19, 2025

If you’re looking to do some home renovations but don’t have all the cash up front to pay for materials and contractors, here are a few ways to use mortgage financing to bring everything together. Existing Home Owners - Mortgage Refinance Probably the most straightforward solution, if you’re an existing homeowner, would be to access home equity through a mortgage refinance. Depending on the terms of your existing mortgage, a mid-term mortgage refinance might make good financial sense; there’s even a chance of lowering your overall cost of borrowing while adding the cost of the renovations to your mortgage. As your financial situation is unique, it never hurts to have the conversation, run the numbers, and look at your options. Let’s talk! If you're not in a huge rush, it might be worth waiting until your existing term is up for renewal. This is a great time to refinance as you won’t incur a penalty to break your existing mortgage. Now, regardless of when you refinance, mid-term or at renewal, you’re able to access up to 80% of the appraised value of your home, assuming you qualify for the increased mortgage amount. Home Equity Line of Credit Instead of talking with a bank about an unsecured line of credit, if you have significant home equity, a home equity line of credit (HELOC) could be a better option for you. An unsecured line of credit usually comes with a pretty high rate. In contrast, a HELOC uses your home as collateral, allowing the lender to give you considerably more favourable terms. There are several different ways to use a HELOC, so if you’d like to talk more about what this could look like for you, connect anytime! Buying a Property - Purchase Plus Improvements If you’re looking to purchase a property that could use some work, some lenders will allow you to add extra money to your mortgage to cover the cost of renovations. This is called a purchase plus improvements. The key thing to keep in mind is that the renovations must increase the value of the property. There is a process to follow and a lot of details to go over, but we can do this together. So if you’d like to discuss using your mortgage to cover the cost of renovating your home, please connect anytime!

Fixed-Rate or Variable-Rate Mortgage?

By Sabeena Bubber • February 12, 2025

If you're looking to buy a new property, refinance, or renew an existing mortgage, chances are, you're considering either a fixed or variable rate mortgage. Figuring out which one is the best is entirely up to you! So here's some information to help you along the way. Firstly, let's talk about the fixed-rate mortgage as this is most common and most heavily endorsed by the banks. With a fixed-rate mortgage, your interest rate is "fixed" for a certain term, anywhere from 6 months to 10 years, with the typical term being five years. If market rates fluctuate anytime after you sign on the dotted line, your mortgage rate won't change. You're a rock; your rate is set in stone. Typically a fixed-rate mortgage has a higher rate than a variable. Alternatively, a variable rate is not set in stone; instead, it fluctuates with the market. The variable rate is a component (either plus or minus) to the prime rate. So if the prime rate (set by the government and banks) is 2.45% and the current variable rate is Prime minus .45%, your effective rate would be 2%. If three months after you sign your mortgage documents, the prime rate goes up by .25%, your rate would then move to 2.25%. Typically, variable rates come with a five-year term, although some lenders allow you to go with a shorter term. At first glance, the fixed-rate mortgage seems to be the safe bet, while the variable-rate mortgage appears to be the wild card. However, this might not be the case. Here's the problem, what this doesn't account for is the fact that a fixed-rate mortgage and a variable-rate mortgage have two very different ways of calculating the penalty should you need to break your mortgage. If you decide to break your variable rate mortgage, regardless of how much you have left on your term, you will end up owing three months interest, which works out to roughly two to two and a half payments. Easy to calculate and not that bad. With a fixed-rate mortgage, you will pay the greater of either three months interest or what is called an interest rate differential (IRD) penalty. As every lender calculates their IRD penalty differently, and that calculation is based on market fluctuations, the contract rate at the time you signed your mortgage, the discount they provided you at that time, and the remaining time left on your term, there is no way to guess what that penalty will be. However, with that said, if you end up paying an IRD, it won't be pleasant. If you've ever heard horror stories of banks charging outrageous penalties to break a mortgage, this is an interest rate differential. It's not uncommon to see penalties of 10x the amount for a fixed-rate mortgage compared to a variable-rate mortgage or up to 4.5% of the outstanding mortgage balance. So here's a simple comparison. A fixed-rate mortgage has a higher initial payment than a variable-rate mortgage but remains stable throughout your term. The penalty for breaking a fixed-rate mortgage is unpredictable and can be upwards of 4.5% of the outstanding mortgage balance. A variable-rate mortgage has a lower initial payment than a fixed-rate mortgage but fluctuates with prime throughout your term. The penalty for breaking a variable-rate mortgage is predictable at 3 months interest which equals roughly two and a half payments. The goal of any mortgage should be to pay the least amount of money back to the lender. This is called lowering your overall cost of borrowing. While a fixed-rate mortgage provides you with a more stable payment, the variable rate does a better job of accommodating when "life happens." If you’ve got questions, connect anytime. It would be a pleasure to work through the options together.

Mortgage Advice to Help You Through a Separation

By Sabeena Bubber • February 5, 2025

With the latest stats claiming that about half of marriages end in divorce and with around three-quarters of Canadians being homeowners, it’s important to know how to handle your mortgage if you decide to separate. Here’s a quick list of things to consider. Keep making your payments. A mortgage is a legally binding contract between you and the lender. It doesn’t take marriage into account. If your name appears on the mortgage, you're responsible for making sure the regular payments are made. A marital breakdown does not give you an excuse not to make your mortgage payments. If, during your marriage, you've relied on your spouse to make the mortgage payments and you aren’t certain payments are being made after separating, it's in your best interest to contact the lender directly to verify your mortgage is being paid. If payments aren't being made, it could affect your credit score or worse; the lender could start foreclosure proceedings. There is always a financial cost to break your mortgage. When working through how to split your finances, you decided to either refinance your mortgage, remove someone from the title, or sell the property, keep in mind that you will incur legal costs. If you’re in the middle of a term, the penalty for breaking your mortgage might be significant, especially if you have a fixed-rate mortgage. It’s certainly worth contacting your mortgage lender directly to verify the cost of breaking your mortgage. Having that information accessible when writing out your separation agreement will provide increased clarity. Listing your marital status as separated or divorced. When completing a mortgage application for securing new mortgage financing, when you list your marital status as separated or divorced, you can expect that a lender will want to see your legal separation agreement or your divorce papers. The lender wants to make sure you aren’t responsible for support payments. So if you haven’t finalized the paperwork, expect delays in securing mortgage financing. It could be harder to qualify for a new mortgage. With the separation of assets also comes the separation of incomes. If you qualified for your existing mortgage on a double income, you might find it hard to maintain the same quality of lifestyle post-separation. This is where careful planning comes in. Working closely with your independent mortgage professional will ensure you understand exactly where you stand. You’ll want to put together a plan for how to handle the mortgage on the matrimonial home. Purchasing the matrimonial home from your ex. There are special considerations given to people going through a separation to buy out the matrimonial home. Instead of looking at the transaction like a refinance where you can only borrow up to 80% of the property’s value, lenders will consider one spouse buying out the other up to a 95% loan to value ratio. This comes in handy when dividing assets and liabilities. Navigating the ins and outs of mortgage financing isn’t something you have to do alone. If you're going through a separation and you’d like to discuss all your mortgage options, please connect anytime. It would be a pleasure to walk you through the process.