How to make a budget

You’ve surely heard it a thousand times: it’s important to have a budget. Whatever your earnings, knowing where your money is going is the key to a healthy financial situation. The reality, however, is that many of us were never taught how to budget. If you’re thinking, “That’s me,” here are a few tips and tricks to get you started.

Who needs a budget?

The real question is, who doesn’t? Everyone stands to benefit from knowing how their money flows in and, most importantly, out of their accounts. A budget enables you to get a bird’s-eye view of your finances and keep track of how they’re doing. It’s also useful for homing in on expenses that are making an unnecessary dent in your pocketbook, and it can help you identify new opportunities to make or save money. We’re all familiar with the morning coffee example (we won’t touch your avocado toast), but that still doesn’t stop many people from grabbing a latte or a cappuccino on their daily commute to work or school. At, say, $4 a pop, 5 days a week, it adds up to a whopping $80 a month, not counting tips. You might consider making your trip to the coffee shop a Friday treat instead. With savings of $16 a week, that extra $64 a month in your bank account is a real treat indeed!

You don’t have to earn big bucks to benefit from proper management of your assets. The moment you’ve got even a small amount of earnings and expenses is when you should start. Developing good personal financial habits will help you make good decisions and will have a positive impact on your future. Plus, having a good grip on your finances invariably leads to a sense of control and keeps stress at bay. Less stress? Sign us up!

Budgeting: Necessary evil or godsend?

Whether your goals are lofty, like owning property or retiring comfortably, or simpler in nature, like paying off debts or simply staying ahead of bills, budgeting is a necessity. But it certainly doesn’t have to be the odious task it’s made out to be. So forget what you know (or, more likely, don’t know) about cross-tabulated multi-tab Excel sheets, and let’s take a simpler route.

First, you’ll want to make a list of all your money coming in. This should include all revenue streams (paycheque, incoming transfers, the sale of your vintage boho lamp on Marketplace, etc.).

Next, it’s time to tackle your outflow of cash. There are 2 types of expenses to consider here: fixed and variable. Fixed expenses include recurring costs that vary little or not at all each month, such as rent and your internet bill. Variable expenses refer to recurring costs that vary in amount week to week or month to month, such as groceries, pharmacy purchases (drug store), gas, outings, etc. It should be an easy enough list to compile.

You can keep it super simple by dividing your inflow and outflow of cash into 2 columns, but some people like to create categories to keep better track. Here are some of the more common categories budgeters use:

• Housing
• Transportation
• Entertainment/Sports
• Daily living (grocery, pharmacy, etc.)
• Healthcare
• Insurance
• Refunds and savings

Did you know we have an easy-to-use online tool to help you draw up your budget? It has a wide range of preset categories and types of expenses, as well as an exhaustive list of budget items. It also allows you to export your completed budget to Excel with the click of a button, and offers budgeting tips tailored to your situation.Forgotten expenses.

Forgotten expenses

Things may start to get a little trickier when it comes to more sporadic costs, such as annual fees or irregular expenditures. These expenses are often left out of people’s budgets, as if paying them magically erases them from one’s memory. To cover them, you may find yourself dipping into your savings or reaching for your credit card.

Try listing these surprise expenses in your budget and dividing the total amount over 12 months. You can then set that sum aside each month as a sort of fund for those sneaky little (or big) costs. Here are some examples of “oops!” expenses to help jog your memory:

• Pet food, toys and treats
• Vet bills
• Driver’s licence and plates (once a year, on your birthday no less, and still often forgotten!)
• Tire change (twice a year)
• Hair salon visits (as needed)
• Phone apps
• Small cash purchases (coffee, midafternoon chocolate fix, etc.)
• Yearly bicycle tune-up (basic labour + occasional parts)
• Digital subscriptions (magazines, newspapers, etc.)
• New running shoes
• Annual national park pass

You may forget to include some items in your first go at a budget. Don’t worry, it happens to everybody. Remember, budgets, like their creators, are constantly evolving.

It’s alive! Your budget is fluid, not fixed

While it’s important to respect your budget, it’s not set in stone by any means. You always have the power to make adjustments and modifications, and to find new ways to save. In fact, any change happening in your life merits going over your budget to make sure it’s still balanced. Some things to consider:

• A new relationship
• A new car
• A large purchase
• A new job
• A new furry friend
• An emergency

Don’t have a budget yet? Don’t sweat it! It’s never too late to start, and you can always tweak it along the way.

To restore balance to your budget, you can review your variable expenses and some of your fixed ones. This enables you to spot the areas that can have a real impact, to reduce your cash outflow and to free up some funds for your projects. The key is knowing where your money is going. Are you a Desjardins member? You can find the My Budget tool in your AccèsD. It gives you an overview of your current transactions, and it automatically sorts your expenses into categories (which you can adjust at any time). This sweeping view of your finances is essential to helping you monitor your habits and identify areas that require action.

Once you’ve taken action to reduce your expenses, you can start saving for all your projects—and that sweet #vanlife you’ve been dreaming about for years can finally be within reach.