Saving to Buy a Home? How ‘Loud Budgeting’ Can Help You Get Started
Thursday, November 7, 2024
By David Elver for REALTOR.ca
It’s not just housing costs that have increased over the past several years—that’s evident with one trip to the gas station, or grocery store. Worries about how to make ends meet are common among younger Canadians and those wanting to buy their first home.
According to a recent survey from Ipsos, 85% of first-time home buyers are experiencing financial anxiety. Another survey from Environics Research shows 67% of first-time home buyers are worried about being able to afford a down payment, or feel in danger of being priced out of the housing market altogether.
Traditionally, the advice to address these concerns would be to set up a budget and start saving; however, in an age of social media, it can be easy to experience some FOMO when scrolling, and that can come with feelings of shame and anxiety regarding your own personal finances.
Lately, a new trend called loud budgeting is encouraging Canadians of all ages to start speaking up about their money goals and concerns—and not feel ashamed for taking their financial priorities seriously.
What is loud budgeting?
The term “loud budgeting” first became popular towards the end of 2023, when TikToker Lukas Battle posted a video highlighting his financial goals for the new year. Within a few months, #loudbudgeting had racked up millions of views online.
Essentially, loud budgeting means setting up a budget to control your spending, and then sharing that decision with friends, family, or even your online following. Loud budgeting helps remove the stigma around talking about money by encouraging people to be open, honest, and transparent about their finances.
“Loud budgeting is about saying no to things that conflict with your financial goals, and telling people the reason why to spark a discussion,” explains Deidre Cross, a budgeting expert and owner of Ohh You Budget.
“This could mean declining going out to dinner with friends or to that destination wedding, and simply stating it’s because you’re saving money,” she adds. “It empowers people to be comfortable speaking up about their financial goals, which is a huge shift from even a few years ago, when speaking about personal finances was seen as tacky or something you just don’t do.”
For financial consultant Lesley-Anne Scorgie, a best-selling author and founder of MeVest, loud budgeting is also about both feeling in control of your life and actually having control of your finances.
“Not feeling like you’re in the driver’s seat is stressful and often results in money mistakes,” Scorgie says. “First-time buyers have the added pressure of high housing costs. So I always encourage 20- and 30-somethings to incorporate money learning podcasts, articles, or budgeting into their weekly routines, and pick the systems and templates that work for them.”
Rising costs and the importance of financial literacy
According to some estimates, about half of Canadians today are living paycheque to paycheque. By encouraging you to take a closer look at your spending, loud budgeting helps identify your bad financial habits so you can stop yourself from repeating them, and start saving for the future.
The Financial Consumer Agency of Canada (FCAC) reflected this movement to destigmatize talking about personal finance when it chose “Money on your mind: talk about it!” as the theme for this year’s Financial Literacy Month.
“Financial literacy affects your entire overall wellbeing,” Cross says. “Understanding things like budgeting, savings, debt management, investing, and how credit scores work will help you avoid costly mistakes and make smart decisions, especially if your goal is to become a homeowner.”
The ‘loud’ part of loud budgeting
While the idea of sticking to a budget isn’t new, the “loud” part of loud budgeting is. A key part of the trend is about sharing your commitment to rein in your spending habits with the people around you, whether online or in person.
The idea is that by letting your friends and family members know you’re trying to change your spending habits, there’s a better chance you’ll be able to hold yourself accountable for your decisions. That way, the next time you’re tempted by an unnecessary splurge, you may be more likely to give yourself permission to say, “no, thanks.”
“When more people talk about something, they normalize it,” explains Jessica Moorhouse, a Canadian money expert, financial speaker, and host of the More Money Podcast.
“In my experience, most people want to talk about money. They just don’t want to be judged or be the first one to bring it up,” she notes. “So why not be that person and talk about your budget, your struggles, your goals? You may just open the door for a number of people who were hoping someone would be brave enough to bring it up.”
Loud budgeting also challenges the stigma that can come with living on a budget by positioning it as being less about whether or not you can afford something or depriving yourself of life’s little luxuries, and more about choosing not to spend your money on things you don’t need. This lets you save more for the things you really want—like paying off debt, building up a rainy-day fund, or saving for a down payment on a home.
To put it another way, loud budgeting is about putting your own financial needs, goals, and aspirations ahead of the often-unrealistic pressures of other people’s expectations. Plus, by setting an example, you might also inspire others to re-think how they look at their own finances.
“It’s a conscious act to turn your back on a ‘keeping up with the Joneses’ culture that idolizes acting like you have more money than you do,” Scorgie explains.
“People with all types of incomes use budgets,” Moorhouse adds. “At the end of the day, a budget is just about making a plan for what you want to do with your money so you can reach your goals, like buying a home, travel, and retiring one day. Who wouldn’t want that in their life?”
Buying a home? Having a budget can help!
For first-time home buyers in particular, creating a budget can be a crucial first step towards homeownership, whether that new home purchase is six months, a year, or 10 years away.
For tmost Canadians, buying a home is the biggest and most expensive purchase they’ll ever make. The best way to make that decision wisely is to understand your income and expenses, identify your financial priorities, and calculate how much you can afford to put away each month towards that all-important down payment.
Affordability Calculators make it easy to figure out how much home you can afford, and what price range you could be comfortable within. Just remember that the down payment and mortgage aren’t the only costs that come with homeownership. You’ll also have to factor in things like utility bills, insurance, condo fees (if applicable), and property taxes. Once you’ve calculated your budget, stick to it. It’s easy to get caught up comparing ourselves to people we know or follow on social media.
After you buy your home, a budget can also keep you from becoming house rich, but cash poor. Among other things, a budget can help you save for an emergency fund, navigate future changes in mortgage payments or interest rates, and build up a cushion to handle all the unexpected home repairs, renovations, and other expenses that will inevitably pop up.
“The first 90 days of homeownership are generally a rude financial awakening at just how much things will cost,” says Scorgie. “It’s key to lay low, let the dust settle, update your budget template, and quickly trim back any spending that’s not core.”
Common budgeting myths
But while loud budgeting has been trending, there are still common mistakes or misconceptions people can make when it comes to budgeting. For example:
• Myth No. 2: Budgets are too hard! Many first-time budgeters also worry that a budget is going to take too long or be too much work. There are many free Budget Planners and other tools available online that can help you build your first budget with just a few clicks (REALTOR.ca makes it easy for you by including four different types of real estate-related calculators).
• Myth No. 3: I don’t need a budget. Some people feel that just because they’re not in debt, they don’t need a budget. But if you want to fund a major change in your life (like buying a home), being debt-free may not be enough. A budget will give you a clearer picture of where your finances are today, and what you need to do to get to where you want to be tomorrow. Plus, keeping a budget could be what kept you out of debt in the first place!
• Myth No. 4: Budgets are isolating. Many people think having a budget is isolating and lonely. To counteract this fear, find yourself a “budget buddy” who wants to make similar changes so you can keep each other company—and yourselves accountable.
• Myth No. 5: Budgets are fixed and final. Lastly, a budget isn’t written in stone. Life always has surprises in store for us, so a budget isn’t meant to be an unchangeable rule you can’t ever break. It’s just a set of goalposts you can use most of the time, to help you make your short- and long-term financial goals a reality.
What if you’ve never had a budget before?
If you want to buy a home in the next few years and you’ve never had a budget before, a good place to start is by getting a detailed overview of your current financial situation.
First, start with your income – how much money you bring in each month or year.
Next, add up all your assets, including savings accounts, Guaranteed Investment Certificates (GICs), and any investments you’ve made in programs like Registered Retirement Savings Plans (RRSP), Tax-Free Savings Accounts (TFSA), or First Home Savings Accounts (FHSA).
You’ll then want to break down all your spending (monthly or annually). This means everything. Your rent, insurance, car payments, discretionary spending, payments to debt, payments to savings accounts, etc. This is where things can get a bit uncomfortable because there’s no hiding your spending habits. But, being honest about your spending is the only way to set a true and realistic budget.
From there, decide how much you want to save each month. While individual circumstances vary, a good rule of thumb when building a budget is the 50/30/20 rule: spend 50% of your income on your needs, 30% on your wants or “nice to haves,” and 20% for savings.
“There are so many great tools these days to get started,” Moorhouse says. “See what format works for you, and then, once a month, set aside time to put in your spending and net worth numbers, and check your budget against your spending to see how you’re doing.
“I’ve personally had a practice of doing this for almost eight years,” she adds. “It’s been the biggest help with me living within my means and reaching my financial goals.”
Some simple tips to get started
If you’re still not sure how to begin, here are a few simple and easy steps you can take right now to start creating your budget:
• Track your spending. Check your bank statements or track your spending for a few months to figure out what you’re spending your money on, and how much you’re spending. There are many tools that can help, like the Financial Consumer Agency of Canada’s Budget Planner
• Identify where you can cut back. Are you paying for five streaming services when you really only watch one? Can you bring lunch to work instead of eating at restaurants? Or use coupons to get a deal on your groceries?
• Start small. Even saving a few dollars a week in a high-interest savings account could be worth thousands or even tens of thousands in five, 10, or 20 years.
• Avoid “impulse buys. If you’re not sure if you really want or need that purchase, give yourself a day or two to think about it before you spend the money.
• Spread the word! Like the “loud” in loud budgeting suggests, tell a few friends or family members what you’re trying to do. That way, you’ll be more accountable to your new budget, and they’ll be less likely to pressure you to spend money you don’t have or don’t want to spend.
As for dealing with the stigma around budgeting, sometimes the best approach is simply to re-frame your mindset.
“I always tell people to rethink what a budget actually is,” Cross explains. “It’s not about saying ‘no’ to things. It’s about being intentional, so you can do and have the things you want.
“When you think of a budget as a tool to help you get what you want, it shifts your mindset,” she adds. “You go from feeling restricted to feeling empowered because you’re in control of your money. It’s all about having a plan so you can enjoy life without the financial stress.”
Don’t be afraid to ask for help
As with any other major life decision, don’t be afraid to ask for help. If you don’t already have someone who can guide you, ask trusted friends or family members to recommend a financial advisor or money coach who can walk you through setting up a budget.
If you’re looking to buy a your very first home, we can help. In addition to giving you a better idea of the current housing market and the kinds of properties you can afford, we can answer any questions you may have, and help you figure out what you can do to make sure you’re financially ready to become a homeowner. Please reach out by calling me (Brian Kondo), personally, at 905-683-7800.
Thanks for reading today’s BLOG!!!
Brian Kondo
Sales Representative / Team Leader
The Brian Kondo Real Estate Team
Re/Max Hallmark First Group Realty Ltd.
905-683-7800 office
905-426-7484 direct
brian@briankondo.com
www.BrianKondo.com
www.BrianKondoTeam.com
David Elver's article was initially published on REALTOR.ca. You can find it by clicking here.
| REALTOR.ca is the most popular and most trusted real estate website in Canada. Owned and operated by the Canadian Real Estate Association (CREA), REALTOR.ca provides up-to-date and reliable information that makes finding your dream property easy and enjoyable. REALTOR.ca is popular with sellers, buyers, and renters and is accessible online and on mobile devices. |
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About the Author David Elver is a Vancouver-based freelance writer, editor, and screenwriter who has worked with some of Canada’s leading public- and private-sector organizations. His work has appeared in newspapers, magazines, and online publications across Canada, and run the gamut from feature articles and social media success stories to best-selling coffee table books and two feature-length television movies. David enjoys kayaking, snowshoeing, and sunset strolls on the beach, although usually not at the same time. |
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