Not managing your finances is extremely stressful, and guarantees that you won’t have money when you need it. On the other hand, making a budget is daunting, and not fun. This is why we created this guide. It will help you get started on budgeting without feeling overwhelmed. The joy of being in control of your finances will encourage you to keep going!

Step 1: What’s going in and coming out

In order to budget, you need to know how much money you get each month (income) and where you’re spending it (expenses). This is a big enough task that some people never accomplish it, but we’re here to help! An easy way to get started is to use the spreadsheet created by the Credit Counselling Society. You simply have to input your information into these forms. Luckily, all this information is available to you online – you can access your bank and tax (CRA) accounts, and your utility bills online.

Budget Worksheet by My Money Coach, Credit Counselling Society

This spreadsheet will automatically make graphs that show you where you’re spending your money, and how your spending habits compare to the average Canadian. These visuals are helpful for gaining perspective about your spending.

Budget Calculator by My Money Coach, Credit Counselling Society

While this spreadsheet is extremely helpful, it asks you for a lot of numbers. If you’ve never made a budget before, collecting all this information can be overwhelming. Here are a few tips to consider:

Budgeting Tip 1:

Don’t worry about getting all the numbers the first time you fill in the form. You can save the form to your computer, then come back and make adjustments later. Budgeting is an ongoing process!

Budgeting Tip 2:

Spend every penny you earn. Wait a minute, let me explain! Every dollar that comes in should have a place to go (a category); there should be no money left over “just in case”. Giving every dollar a job increases the likelihood that you won’t spend it on something else. Ambiguity equals overspending much of the time. Make your savings one of your “expenses”.

Budgeting Tip 3:

Include some money for irregular, but predictable expenses. For example, car repairs or seasonal clothing. These expenses are usually what cause people to go over budget. Think about how much you spend in a year on an expense, for example maintaining your car. Then divide that number by twelve, and put this amount aside each month. That way, when you need the money, it’ll be there for you. Without having money set aside, you’ll pay for these expenses on credit and create debt for yourself. The Credit Counseling website has these categories in the spreadsheet for you.

Budget Worksheet by My Money Coach, Credit Counselling Society

Remember to put some money into emergency savings every month – even a small amount will grow into substantial savings in time. This money is not a buffer when you go over budget. This is for unforeseen events like losing a job, or sudden home repairs. There’s a “savings” section at the bottom of the spreadsheet.

Budget Worksheet by My Money Coach, Credit Counselling Society

Red flag: You’re spending more than you make. This is a serious situation. The best way to approach it is to be as specific as possible about where you can actually reduce spending.

Real life example: You spend 400$ a month on eating out. Take a closer look: Is this money going to beers with friends, coffees at work, or meals with your partner? Decide how much you can reduce and make a clear plan. For instance, you plan to reduce meals out with your partner. Decide how much you can spend in a month and think about how many meals out that equals. If your initial budget was $400 for meals out and your new budget is $300, and a meal together is $50 dollars, then you need to plan for two fewer meals out each month. Be as specific as possible! Having a clear idea about how you’ll reduce spending guarantees success.

Step 2: Keep track of spending

You need to see where your money is going, and if your budget is working. A few months before making a budget, observe your spending habits. Once you make your budget, continue keeping track of your expenses. It’s not a one and done: budgeting is an ongoing process. Find a way of keeping track that works for you – use a notebook, an app, or a spreadsheet.

Budgeting Tip 4:

Make sure you are following your budget plan throughout the month. A practical way to break down your monthly income and expenses is to think about them on a weekly basis. It’ll be easier to see how much money you have as the month progresses. This will prevent you from incurring too many expenses at once and not having any cash on hand.

Red flag: Your budget isn’t working. This is a totally normal situation especially if you’re new to budgeting. Don’t abandon your budget! Check where it isn’t working. Maybe you spent more on transportation than you wanted – it happens! Again, the best way to approach this situation is to be as specific as possible. Do you need to ride your bike more, walk to evening events, or carpool? Do you need to budget more money for an expense to avoid going over again? Make adjustments as necessary. Create a new plan to help you stick to your budget.

Real life example: Your car needed two new tires – an unexpected expense. The tires cost $300. Where are you going to find this money in your budget? This is when knowing the difference between “needs” and “wants” becomes very important. When you have a clear idea of your wants, you know where you can decrease spending. Maybe you have to make a cheaper plan for a trip you’re taking later in the year, or maybe your laptop is still good for another year. This situation also emphasizes how important it is to set money aside for emergency expenses. In fact, this is why most budgets fail. When these expenses occur, there is no room in their budget for them. These are the expenses that push us into debt.

Budgeting Tip 5: Set short-term and long-term goals

When you’re ready for the next level of budgeting – learn about setting short-term and long-term goals. The Credit Counselling Society actually recommends setting your goals before you make your budget. What we’ve outlined above is a quick way to get started with budgeting.

When you have the time to create a more thorough plan, use the Credit Counselling Society’s 7 Steps to Build a Household Budget. Each step is easy to follow. You can do it online or by downloading a fillable pdf version of the workbook which you can write on and save on your computer. You can also print the workbook and fill it out by hand.

Goodluck and may you always be financially secure!
 
By Nastashya Wall
 
Sources: Credit Counseling Society, Financial Consumer Agency of Canada, and Broke Millennial by Erin Lowry. Accessed May, 2024.