If you want to create a budget to help manage your money, but don’t know where to start, this is for you.
There’s tons of information out there about getting your side hustle on, but a monthly budget is not about what you make, it’s about what you spend. A budget is like brushing your teeth, eating healthy or going for a run to get some exercise. It’s a form of self-care that can lead to reaching your financial goals. Whether you’re looking to become debt free, feel the pride of homeownership, or live the retirement lifestyle you’re dreaming of, knowing how to make a budget can help get you there.
Let’s get started.
Step 1: Income
Calculate your total monthly income. You need to know how much money you will have each month to meet your expenses. Include your pay, as well as any other money you earn on a regular basis.
Step 2: Expenses
Calculate your total monthly expenses. Take a look at your last three months of spending. Review your account statement and your monthly recurring bills and add them all up. Be sure to include saving and investing as part of your household budget.
There are two types of expenses: Fixed expenses (needs) are things like your mortgage or rent and utilities. Discretionary expenses (wants) are things like dining out expenses, coffees and entertainment. Keep in mind, you might have additional expenses not listed here, like annual membership fees or dues, so make sure you include those as well.
Here are some examples:
- Housing (mortgage payment or rent, condo fees, utilities, property taxes)
- Transportation/commuting costs (gas or public transit costs)
- Groceries (not dining out)
- Child care/pet care
- Health care & medications
- Loan payments (student loans or line of credit)
- Insurance (home, auto, medical, life)
- Cable, cell phone & internet
- Clothing
- Dining out/entertainment/gifts
- Emergency fund
Step 3: Balancing Act
Now that you have your income and expenses per month, try to create a balanced budget. You may find that your income and expenses do not balance out at the end of the month and further review of your budget is needed. Go back and look at your fixed and discretionary expenses and adjust where you can. Maybe it means skipping the daily coffees. Or maybe it’s time to renegotiate with one of your service providers.
Check the Financial Consumer Agency of Canada for a budget calculator and other tips on how to make your budget.
At Saven Financial, we’re passionate about helping people save. It’s why we’re committed to delivering a simple, and safe way to save money so our members can achieve their financial goals through smart saving. Check out our high interest savings account and GIC market-leading rates and start saving today.