Add/Edit Expenses

Expenses record the money that you need to live on, to support the lifestyle that you want. It is money that is spent or given away and that you will never see again. Do not enter Savings here.

We may have automatically automatically created an expense pre-retirement and an expense post-retirement. You can edit those expenses, and reduce them by any amounts that you have (or will) enter for LOAN payments and LIFE INSURANCE premiums so that they are not counted twice.

OUR CHOOSE YOUR LEGACY tool can also automatically calculate EXPENSES for you (subscription required). Make sure the Spending PRIORITY has a limit set to 0% if you would like to use that option.

How to enter expenses:

There are expenses that we have already considered and thus do not need to be added here. Other areas of the MoneyReady App cover banking and investment expenses in ACCOUNTS and INVESTMENTS, loan expenses (principal and interest) in LOANS, and life insurance premiums in LIFE INSURANCE. Another expense that will be automatically calculated is income taxes, including those generated by the INCOMES and by INVESTMENTS. Defined Benefit Pension plan contributions are already considered in INCOMES. Savings to ACCOUNTS and INVESTMENTS are considered SAVINGS in the MoneyReady App and are covered in the SAVINGS section below, so you should not enter these in EXPENSES.

If you are cringing at the thought that you will have to enter a full budget of expenses, don't. Pre-retirement EXPENSES are optional in the MoneyReady App. You can instead instruct the TIME MACHINE to spend up to 100% of any money that you have leftover at the end of the year, after paying the expenses automatically calculated (as described above) and any AUTOMATIC Deposits and Withdrawals (these are also optional). To understand how this is done, you will need to read the PRIORITIES Help page. We do however recommend that you enter at least a minimum living expense. This would correspond to the money that you need to live on, after tax, and after paying the expenses automatically calculated (as described in the first paragraph of this section). Otherwise the TIME MACHINE will not withdraw money from your ACCOUNTs if you need it. So will need to enter EXPENSEs for after retirement. Advisors generally call these "Required Income".

Note to advisors or users coming from other financial planning software:
To set up the TIME MACHINE in a similar way as other software programs that assume all money not explicitly saved before retirement is spent:

1. Add post-retirement annual required income after taxes in today's dollars, as an EXPENSE starting at retirement. Making the expense(s) Joint will give more flexibility to the TIME MACHINE if there is a spouse.
2. It is optional to specify pre-retirement EXPENSES although you may want to add those that have tax credits or deductions. Always enter the education expenses that will be drawn from RESPs and medical expenses paid from a U.S. Health Savings Account.
3. Make sure to add AUTOMATIC SAVINGS for money to be saved to accounts rather than spent.
4. Set Spending as the top Deposit PRIORITY with a limit 100%. Any excess income not saved will be spent. You will see the total spending in the TIME MACHINE results.

Another option is to not enter EXPENSES at all, and use the CHOOSE YOUR LEGACY tool to have them entered automatically based on the amount of money you want to leave to your heirs at death.

The only mandatory expenses to enter here are any educational expenses to be paid from RESPs and medical expenses paid from U.S. Health Savings Account. If you created RESP accounts, the only way to withdraw from these in the TIME MACHINE is to add educational expenses, which you can link to the RESP account. The TIME MACHINE will then know to withdraw from that account to fund that expense, otherwise, the RESP account will grow until it is automatically closed. Similarly, if you have entered (in ACCOUNTS) a U.S. Health Savings Account that you can use to pay for medical expenses, you can select the account from the "tax deduction/credit" dropdown menu. This will indicate the expense as an eligible medical expense to be paid for with a tax-free withdrawal from the account.

If you have a spouse, the expense can be owned by yourself, your spouse, or jointly. It can be in any currency. If jointly owned, the expense will be paid proportionally to the income of each spouse, and it will be inherited, in full, by the widow(er) in the TIME MACHINE. If not jointly owned, the expense will die with its owner. If you would prefer a different attribution, please enter the expense as two separate entries, that is, one for each spouse.

If you are not budget-phobic, then the MoneyReady App can also help you to define a budget for each year as detailed as you like. Each expense entry requires a unique name, an owner (if you have a spouse), a start date (can be in the future), and an end date.

We now offer three options for entering the dates and amount applicable for an expense.

1. Yearly expenses: Regular yearly expenses that span multiple years can just be entered with a start and end date and a yearly amount. If the start and end dates are different, but less than a year apart, please annualize the expense. For example, if you are paying $1000/month for only 3 months, enter that as $12,000/year (with start and end dates 3 months apart), or use the repeated lump sum feature (option 3 below) instead. The yearly amount will be pro-rated in any year for which the expense does not span the full year.


2. Lump sum expense: If the start and end dates entered are the same, enter the actual lump-sum amount payable on that one date.


3. Repeated lump sum expenses: If you want to enter a recurring expense on specific dates, you can select those dates in the "OR enter multiple dates for repeated expenses" input box. Clicking on that box will activate a date-picker from which you can select multiple dates. We allow up to 50 dates per recurring expense. You can also type or paste the dates in the box. The dates entered should be in YYYY-MM-DD format, separated by commas (no spaces).
   To make that easier with regularly recurring dates, we also show a widget for those recurrences. They can repeat from any date for any frequency by month or year. If that feature is used, click the Generate button to create the dates, then click the widget to "Accept" these dates to be entered. You will still only have one entry for that expense in your list of expenses table, but you will be able to see the multiple dates it applies to by hovering over its start date.
   This feature is meant to be used for non-yearly expenses like buying a car every 5 years, or paying for a sofa on credit for the next 5 months. The amount should be entered as the lump-sum amount on the dates picked. Don't use it for regular yearly expenses. For example don't enter a utility bill you will be paying monthly for several years as a monthly expense, just tell us one annual amount using option 1 instead. Also if you have a yearly expense on one particular date of the year, it's still a yearly expense you can enter with option 1. Remember The TIME MACHINE has mostly the resolution of one year, it pays all its bills from your Wallet account on Dec 31 of the year.

For all options, the expense amount should be entered as a gross expense, including taxes (like HST, GST), before the tax deductions or credits we consider. The program takes into account only some tax deductions and tax credits, and although the federal treatment should be accurate in the TIME MACHINE, it may not be for all provinces (particularly Quebec). Tax deductions will be calculated automatically for childcare, income property or business expenses, and alimony payments. We also consider tax credits for tuition fees, medical expenses and charitable donations. Note that in the TIME MACHINE, we do allow transferable credits to be transferred to a spouse when appropriate, however we do not carry-over unused tax-credits to future years. For other deductible expenses, you can enter them as net of tax.

For expenses that start in the future, you can enter the expense amount in today's currency (i.e. adjusted for inflation) or in future currency. If entered in today's currency, the TIME MACHINE will grow the amount with inflation up to the start date automatically. If entered in future currency, the amount entered will be used. Note that for expenses entered with option 3, enter the amount in today's currency if you want all the future amounts indexed otherwise the same amount in future dollars will be used for all the dates.

For option 1 expenses only, you can set how the EXPENSE grows in time between the start and end dates. We ask if the EXPENSE is indexed, a multiplier (default is 1), and an addend rate (default is 0% and can be negative). If you check "Index to inflation", the EXPENSE will grow with inflation multiplied by the multiplier, plus the specified addend rate. Essentially: growth rate = inflation × multiplier + addend. If not set to be indexed with inflation, you can still set an alternate rate to grow it. In that case: growth rate = addend.

Below your list of EXPENSES table, graphs show the sum of all expenses over all of the dates as entered. One shows the totals in today's dollars and another in future dollars. Additional graphs are shown grouping expenses by type and subtypes if entered.

In order to help you determine if your expenses are reasonable for your income today, we show you your estimated available income today as a star in the first graph. This the amount of money available to spend this year as a guide. Your income is estimated from you entered INCOMES and adding any public pensions payable, after taxes and deductions, and after loan payments, life insurance premiums, any automatic savings/withdrawals and any mandatory RRIF/LIF withdrawals and. Essentially, if the star is below the line for today's total expenses, your entered expenses for this year are too high, and the TIME MACHINE will withdraw from accounts in the order of their Withdrawal PRIORITIES. If the star is above the line for today, then you have excess funds and the TIME MACHINE will spend it or deposit to accounts in the order of your Deposit PRIORITIES.

The calculation of this year's available income is only approximate. Essentially, a mini TIME MACHINE run is done to calculate just the first year according to your inputs. However, there are minimal checks for the legitimacy of those inputs and not everything is considered. Investment income from non-registered investments and their resulting taxes are not considered in this estimate, and neither are proceeds from taking out loans, and selling or buying real estate. If you entered one-time, exceptional incomes or savings for this year, you also may want to subtract these from the displayed estimate. If you are collecting OAS and/or CPP/QPP this year, you should also enter the data in the input screens of the TIME MACHINE tab and then come back to expenses to get a more accurate calculation. The net income shown is for the full current year, while in the more accurate TIME MACHINE results you will see a partial year, with amounts prorated for the time left in the current year. Of course, the TIME MACHINE results will also show you your net income in all future years.

Although budgeting is optional in the MoneyReady App, it is wise planning to have a good idea of your current spending habits so that you can also approximate your future spending habits. How much (and where) you spend your money is tracked by your bank and credit card statements. Review this information. If you tend to use cash, consider using an app or a notepad to track your cash purchases for a few weeks and consider using a budgeting website (a link to a good one is provided below).

One thing to keep in mind is how your expenses will change with other life events that you have entered: for example, children and their education, real estate maintenance expenses, and retirement. We include the ability to start or to end expenses with LIFE EVENTS you entered, so those dates will be automatically adjusted if you change them.

Remember the TIME MACHINE attempts to satisfy this formula every year: Income - Savings - Expenses = 0

Although budgeting is optional in the MoneyReady App, it is wise planning to have a good idea of your current spending habits so that you can also approximate your future spending habits. How much (and where) you spend your money is tracked by your bank and credit card statements. Review this information. If you tend to use cash, consider using an app or a notepad to track your purchases for a few weeks. Also consider a budgeting website (a link to a good one is provided below).

A simple example scenario, for a couple of 30-year-olds with their first newborn, could look like this:

If you have already retired, one line might be sufficient!

If you own RESPs, you may indicate in the appropriate space that the expense should come out of your RESP account. The expense should be an eligible RESP expense. Once the RESP is depleted, any further expense will be taken from the expense owner's income by the TIME MACHINE.

If you want, or need, to get more detailed, here are some ideas for the types of expenses that you may consider:

Housing expenses.

If you rent your home, add up any rent, parking, tenant insurance, coin-laundry, and utilities that you pay within a year.

If you own a home, or plan on owning a home, add a yearly average (in todays's dollars) of property taxes, condo/strata fees, utilities and services, home insurance, and maintenance costs.

Ignore mortgages, as these are considered separately.

If you plan to sell the home and to downsize/upsize or rent, set the end date as your sell date, then enter the expected yearly costs (in today's dollars) for your next home.

If you own investment properties, enter the costs involved.

Note that the expense form allows for tax-deductibility of expenses, so make sure that you enter tax-deductible expenses separately.

Note that the program does not yet account for any Capital Cost allowance.

Regularly recurring expenses include:

Telephone/cable/internet/subscriptions

Food/personal care/clothes

Groceries, coffee/tobacco/marijuana/alcohol, cleaning supplies, dry-cleaning, grooming, hair-care, cosmetics

Work expenses:

lunches/supplies/equipment/association fees/union dues

Entertainment:

travel/dining out/movies and shows/hobbies

Children:

diapers/formula/babysitting/camps/activities/sports equipment

Note: You can get really detailed here if you want as these costs change, from year to year, with the age of each child.

Tax deductible childcare expenses should be entered separately.

Transportation:

Ignore car loans, as these should be entered in LOANS.

If you own vehicles (cars, boats, motorcycles, bicycles, roller-skates, etc.), add lease payments, maintenance, fuel, insurance, parking, and auto club membership costs.

You can add all the recurring expenses for several vehicles together, but note that if you use a vehicle for your business, you may be able to deduct some proportion of its costs. Therefore, relevant vehicle(s) should be entered separately and the proportion deductible entered.

You can enter the one-time purchase of a vehicle every few years at the present value of its net cost (total purchase price - trade-in)

If you plan to get car loans for these future purchases, these would have to be entered separately in LOANS. (This is not encouraged, as you are usually better off buying cars with savings).

Also include bus fare, taxi costs, ride-share costs, and car rentals.

Pets:

vet/pet insurance

pet food/grooming

boarding

School fees

tuition fees/text books/school supplies

Medical

Included expenses not covered/reimbursed by provincial plans or work/private insurance

premiums/deductibles/prescriptions/over-the-counter/dental/specialists (e.g. Massage, Chiropractor, Physiotherapy)/alternative medicine

Disability insurance

Extended health

Gym memberships

Charity