Learning How to BudgetBy Caitlin in Money
The personal budget is probably one of the most hated financial terms out there; it brings up memories of pouring over bills and statements late at night trying to figure out how you’re going to afford to live. We get it and we’re not fond of budgeting ourselves but we do understand that creating a budget could be the difference between financial ruin and being able to afford to live and save and go on vacation. Learning to create a budget that will work for your own personal situation and that is sustainable over time is your number one defense against failure.
Creating a budget, while it may not be the most exciting thing you’ll do this week, is the easy part. Sticking to it and staying motivated is the hard part, this why it’s so important that you create a realist budget.
What is a budget?
A budget can really be anything, a detailed document, a list or even a set of financial goals that you write down. The main point of a budget is to help you take control of your finances and manage your spending and saving. People often find it helpful to set monthly and yearly goals so that they have something to work towards. Budgets are great for:
- People who find that they don’t have enough money to live
- People who spend too much
- People who are trying to pay off debts
- People who have trouble saving on a regular basis
- People who need their paycheques to last longer and cover more
It’s always a good idea to write your budget down (or create a digital document on your phone or computer) this will help produce a much clearer financial picture for you. Seeing the numbers written down on paper could be the wakeup call you need to get your spending under control or to realize your debt has escalated beyond what you thought.
A budget will help you live within your means, set spending limits and create saving goals. It will allow you to see how to start paying down any debt you might have and then figure out how to prevent any future debt from getting out of hand.
Think About and Then Set Goals
Creating a budget around a set of financial goals is a great way to start. For the most part everyone has at least one financial goal, it could be to get out of credit card debt or to start saving for a specific purchase. Whatever it is, start to think about how you can use your current financial situation to achieve your goals.
Start Tracking Your Money
Money, it’s the driving force behind your budget. So you need to start tracking all of it, how much is coming in and how much is going out. This is basically the first step of creating your actual budget so be honest with yourself and account for everything, including those purchases you maybe shouldn’t have made (everything single dollar you spend will impact your overall budget and goals).
You’ll probably want both a weekly and monthly picture of your expenses and income. Keep track of all your spending for a week and then for a month, having a good understanding of your spending habits will help you greatly when creating your actual budget.
Write it Down!
Having some sort of document (choose whatever works best for you) to double check, interact with and write numbers down on will make your budget seem real and official. It will help you remember certain number, set new goals and keep track of all the important facts and figures you need.
The information you have from tracking all your money (income and expenses) should be included in whatever type of written or typed document you create. Obviously everyone’s budget will be different as everyone’s lifestyle is different, but to help you get start, here are some of the major categories you should think about including in your budget.
- From your job
- Any other form of income you might receive within a month
- Mortgage payments or rent costs
- Taxes or condo fees
- Car payments
- Public transportation costs
- Insurance/ registration
- Medical bills (dental, yearly check-ups)
- Child care (if applicable)
- Basic clothing and personal care
- Life/ medical insurance
- Credit card payments
- Loan payments
- Emergency fund
- Savings account
- What are your personal goals and how do they fit into your budget?
The best thing about a budget is that it’s completely customizable; it’s your budget for your life and your money. Make it work for your lifestyle and you’ll have a better chance at succeeding.
Nothing is Set in Stone
Don’t forget that at any point if you find that your budget isn’t quite working for you, you can change it. It’s your budget which means you can revaluate it at any point. It’s actually in your best interest to revaluate your budget on a pretty regular basis (every couple of months) because your life changes and therefore your spending habits probably do too. Change is ok so instead of allowing it to negatively affect your budget use it to your advantage, you’ll be all the more successful.
If you want more information about budgeting and how to successfully implement one into your life, check out the Government of Canada’s website here.