Front-Loaded Expenses for the Year
Recently, it struck me that many of my expenses tend to come in the first half of the year. Here are some expenses that I have to pay in January through June each year:
1. Property Taxes
2. Payroll deductions of CPP contributions and EI premiums (anyone whose income exceeds double the CPP and EI earnings limits will finish getting these payroll deductions before mid-year)
3. Car and house insurance (my renewal date happens to be in the first half of the year, and I pay the full year’s premium in one payment)
In my case, this all adds up to about $11,000 of first half-year costs that I don’t have from July to December. If we toss in the RRSP contribution of nearly $24,000 that I’ll make before mid-year and the resulting reduced payroll taxes for the second half of the year (over $10,000), the imbalance grows to about $45,000! The rest of my expenses tend to be fairly balanced across the year.
None of this causes me much difficulty because I spend so much less than my full income, but it does explain why my savings grow so slowly from January to June. Readers may wish to consider balance across the year when choosing renewal dates for once-per-year costs.
Do you find that your living costs are concentrated in one part of the year?
1. Property Taxes
2. Payroll deductions of CPP contributions and EI premiums (anyone whose income exceeds double the CPP and EI earnings limits will finish getting these payroll deductions before mid-year)
3. Car and house insurance (my renewal date happens to be in the first half of the year, and I pay the full year’s premium in one payment)
In my case, this all adds up to about $11,000 of first half-year costs that I don’t have from July to December. If we toss in the RRSP contribution of nearly $24,000 that I’ll make before mid-year and the resulting reduced payroll taxes for the second half of the year (over $10,000), the imbalance grows to about $45,000! The rest of my expenses tend to be fairly balanced across the year.
None of this causes me much difficulty because I spend so much less than my full income, but it does explain why my savings grow so slowly from January to June. Readers may wish to consider balance across the year when choosing renewal dates for once-per-year costs.
Do you find that your living costs are concentrated in one part of the year?
I find the one-off expenses seem to fall in the last few months of the year for me (Halloween, xmess, curling registration, hosting fees, plate renewal). I also seem to be bad about eating out that time of year. If I manage to take a vacation, I often do it in the summer, and do most of my other occasional buying of things for myself then (clothes, shoes, housewares).
ReplyDeleteThe first third of the year is usually my power savings time, where I manage to come in under budget for a few months in a row and get ahead on RESP/TFSA/other long-term investing contributions (weather's too yucky to go out, no big recurring expenses, and for some reason I only get big freelance gigs in February). Then any savings through the summer tend to get dipped into come the end of the year.
@Potato: So, your situation is the reverse of mine, but it seems not to be hurting too much due to a healthy savings rate.
DeleteI've noticed this for a while too. The big 3 you point out are all in the first half of the year for me too (property tax, EI/CPP, and insurance). Other than those 3, I don't have much in terms of the way of irregular sizeable cash flows.
ReplyDeleteI do monthly RRSP contributions and have taxes reduced at source, so that isn't a factor for me.
@Returns Reaper: I've thought about just doing regular RRSP contributions, but it's tough to come up with $2k/month in the fist half of the year. Another factor is that if I ever quit or get laid off early in the year and choose not to work for the rest of the year, I may not want to make any RRSP contribution. That's why I wait until mid-year.
DeleteSame as you: property tax, school tax, homeowner's insurance - all come in first 6 months of the year. I spread my retirement savings throughout the year though.
ReplyDelete@Tara: My experience seems fairly common except for the crazy way I handle RRSPs :-)
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