Budgeting

Budgeting doesn’t have to be complicated. You can think of it as a process of understanding and categorizing the money you have coming in and going out each month (this movement of money is your “cash flow”).

Becoming aware of your spending habits will help you understand your financial situation, take control of your money and improve your financial security.

What am I budgeting for?

Everyone’s financial situation is different. How you budget and why will be unique to you. Maybe you:

• Feel like you only have money to take care of your bills or are living on a low income.
• Are saving for a big purchase or goal, like buying a new home.
• Are in debt and need a repayment plan.
• Want to have a better understanding of your money and feel in control of your finances.

No matter your reason for creating a budget, the most important thing is you feel confident in how you set aside your money. A flexible budget that works for you will help make money decisions simpler.

Wherever you are in your budgeting journey, maintaining and reviewing a budget will make you successful—however you define success.

Let’s get started. Download this interactive budgeting worksheet and fill it out as you go. 

To get started, you need to know where you spend your money throughout the month. Track everything: e-transfers, each of your bank account statements, credit card statements, bill payments, cash withdrawn and spent.

Online banking allows you to get an overview of how you’ve spent from chequing and saving accounts, plus credit card spending.

To begin, we suggest looking at the last three months of your bills and statements.

Add up how much you’re earning each month. Your net monthly income can be income such as full-time or part-time work, side gigs, investment income and more. 

Make sure to calculate your monthly net income using after-tax money—what money is actually coming in each month.

Add your income on the first page of the budgeting worksheet. 

Let’s try these budgeting categories, based on your real monthly spending.

Fixed expenses are month-to-month expenses such as rent/mortgage payments, student loan payments, internet and insurance. Other expenses (like groceries, clothing, electricity and phone bills) might be fixed expenses or variable expenses, depending on the consistency of your lifestyle.

Variable expenses change based on the month. And as we all know, some months are harder than others. While some variable expenses can be concert tickets or a night out at the bar, others can be vet bills.

Savings are personalized around your financial goals. Savings includes money you put in a savings account, registered savings plan, investment account or cookie jar rather than spending it on your needs and wants. 

Set up your expenses into these three categories by using the budgeting worksheet.

Start by asking yourself these questions:
1. Are there spending habits you can reduce? Are they fixed or variable expenses?
2. How could you reassign that money to help you reach your goals?

Here are a few ways to cut down on common fixed or variable expenses:

• Look for lower priced internet, phone or insurance.
• Unsubscribe from memberships and subscriptions you don’t use.
• Switch to buying the store brand while grocery shopping.
• Streamline your utility usage: turn the lights off when you leave a room, keep the house at a consistent temperature, wash laundry in cold water and hang to dry. You’re reducing your spending and environmental impact.
• Take a mental note of who or what influences your spending, from friends and influencers on social media, to work colleagues and remarketing ads. This awareness helps you determine if a purchase is really aligned with your values and goals.
• Cap your spending on fun, non-essential categories like entertainment or eating out. The goal isn’t deprivation, but allowing yourself to enjoy what you like in moderation so you can continue to work towards your financial goals.

Once you’ve found the saving opportunities that work for you, you can put any extra money in your budget towards your financial goals, including paying off debt.

Looking for a way to allocate your money and build your savings? Try the 50/30/20 rule. It divides your monthly income into needs, wants and goals.

Take some time to determine what you want to save for. Visualize your ideal future. Are you debt-free? Do you have an investment property abroad? Are you retired in a sunny location? Choose a goal that matters most to you and that you’d want to start working towards now.

Make your goals that much easier to achieve using pre-authorized contributions. These automated payments from your chequing account to your savings or investment account guarantee that you’re consistently working towards your future.

Don’t worry if your goals change or it takes you longer to accomplish what you hoped. As long as you keep moving towards your goals, they’re possible to achieve.

As you and your life change, so should your budget.

Which is why it’s important to check your budget regularly. Not only can your income and expenses change, but what’s important to you can change.

Once you’ve created a budget and have an idea of your monthly cash flow, how do you stick to it?

While it’s different for everyone, here are some suggestions:

1. Create a routine to check your budget regularly, once a week for example. Consistency will make any changes more manageable and will make you more aware of the money you have.

2. Set up pre-authorized payments that go into your savings from your paycheque before you start spending each month.

3. Pause before buying non-essential items. You could make a list of things you’re interested in buying, and wait a certain amount of time before revisiting the list and making the decision.

4. Remind yourself of your financial goals, why you made them and how your budget will help you achieve them. Maybe put a wallpaper on your phone or computer that reminds you of one of your goals, or write them down on a sticky note and put them somewhere visible.

5. Set up regular meetings with your personal banker to go over your finances.

6. When you achieve your goals, celebrate.