Do you cringe when you hear the word “budget”? Sure, a budget involves a bit of work on your part, but the payoff is financial discipline and peace of mind. Once you get the hang of it, budgeting is easy and can mean a better financial future for yourself and your loved ones.
What is a budget?
A budget is a written document or electronic file that helps you take control of your personal finances. It is an excellent money management tool that helps you achieve your financial goals.
It is especially important if:
- you find that money is tight
- you don’t know where your money is going
- you have problems paying off your debt
- you don’t save regularly
- you want to find ways to make your dollar stretch further.
A budget helps you see more clearly how much money you receive, and how much you spend and save. It helps you set spending limits and live within your means. It helps you find ways to get rid of your debts, reduce costs and have more money for things that are really important to you.
You can see what a budget looks like by going to the Budget Calculator on the Financial Consumer Agency (FCAC) website or going to the Budget Worksheet provided in this tip sheet. This document will help you fill out the Budget Worksheet and understand how to use it. More importantly, it will show you how to stick to your budget.
Before you start making a budget
Think about your goals
Before you start making a budget, take some time to think about your financial goals. Do you need to pay off your debts? Do you want to save to buy a home or begin building your nest egg for retirement? Do you want to go back to school or send your kids to school?
Keep track of your money
Most people know how much money they make (income). But do you know where your money is going (expenses)? This exercise will help you achieve just that. Every dollar you spend has an impact on the overall picture.
Every day, for a month or two, keep track of everything you buy, from groceries to your daily cup of coffee. Keep a copy of bills you pay during that time, and write down what you buy in a notepad or keep your receipts. Doing this will help you understand your spending habits and make a budget.
Making your budget
To help you make your budget, FCAC has developed an online Budget Calculator that does the math for you. You can also use the Budget Worksheet provided in this tip sheet.
Source: Making a budget and sticking to it, Reproduced with permission from the Financial Consumer Agency of Canada (FCAC), 2015