Our money rules.

We created a finance plan to allow us to live the life we want. We automated our finances in a way that lined up with our life goals. Our car has been paid for multiple years, we spend very little on clothes, our cellphones are multiple years old, and we rarely eat out. These things aren’t important to us and by limiting our spending in these categories we have the ability to splurge where it’s really important, travel and experiences.

We created a set of rules to ensure managing our finances reflects our goals. As our goals change, so will our rules.

1. One year of living expenses

We have a traditional six month Emergency fund in liquid cash sitting in a high-interest savings account which is intended to be used purely in case of income loss. The other bulk lives in our Buffer fund which cover things we know will come up but are hard to plan for, e.g. home repairs, appliance replacements, etc.

2. One extended holiday per year

We travelled a lot as a couple prior to having kids and want to share these experiences with our kids as they grow up. Travelling has been put on hold during the pandemic and we expect to restart this tradition in 2023 with a family trip to Iceland, if safe to do so.

3. Four staycations per year

The kids love hotels. Well, really they want to swim in the pools! Once a quarter, we go to a hotel that is within driving distance and have a one or two night staycation.

4. One family activity per week.

We are an active family who loves the outdoors. We plan at least one [new] family activity per week. Hike a trail, visit a farm, spend the day at a park or try a new activity: e.g. mini putting, bowling.

5. Save 10%, invest 20% of take home

Pay yourself first! These savings and investments are fully automated. Savings include contributions to our Experience fund, and Car fund. Investments are retirement contributions.

6. Invest 65%, spend 35% of extra income

Whenever we receive extra income, we invest 65% and enjoy 35%.

The 35% left for enjoying can be used however we feel. We donate it, add it to our Experience fund, use it as additional guilt-free money. The choice is ours!

Our finance plan is based on our paycheque including all deductions. Once we’ve contributed the maximum to the Canada Pension Plan (CPP) and Employment Insurance (EI) we consider the increase as extra income. This simplifies our budget by keeping it constant all year. This rule ensures we know exactly how to deal with the extra income when it arrives.

Extra income can also include side hustles, barter, stimulus cheques, government credits, a gift, anything that brings in money that is not regular and unaccounted for in our spending plan.

7. Buy cars in cash

We have no interest in cars. To us, they are a means to get from point A to point B. We look for reliable, well priced cars and keep them for as long as they are safe and don’t require much maintenance. The goal is to buy them in cash and continue to make a “car payment” into a savings or investment account to be able to buy the next one, many years down the road, also in cash.

8. Tip at least 30%

This is not about whether service workers should be paid a living wage without relying on tips… they should. When we go out we account for leaving a nice tip. That’s all.

Happy saving!

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