It’s Budget Time

Ever wonder where your money is actually going? Creating a budgeting is a very important and easy way to get control of your finances, help you save, gain disciplined, and will show you exactly where your money is going.

Budgeting is a great way to get ahead financially. In order to be a successful saver, you have to have a budget and goals that you would like to reach. It is important to follow your budgeting plan once created in order to achieve the goals that you have set for yourself. A general rule while budgeting is to save at least 10% of your income.

To create a budget, you first need to figure out your total household income for the month (including pension or any other source of income). Then, gather your statements to get an idea of your expenses for the month (credit card bill, bank statements, hydro bills, mortgage, etc.). It is best to separate your payments into specific categories to get an accurate idea of where you are spending your money (food, transportation, clothing, etc.). With this information, create a projection before the month starts to give you an outline of how you think your money will be spent and what you wish to save by the end of the month. Take your fixed expenses (expenses that remain constant month to month) and input those first. Then, figure out your variable expenses (expenses that will fluctuate month to month) and input them. Keep in mind to add more/less money to in your projections if you know you will be spending more/less in the month (car repair, upcoming birthdays/holidays, food, and vacation).

If you are in debt, you must take that into consideration while budgeting. Your goal should always be to pay off your debt as soon as possible. In order to do so, it may mean cutting expenses or spending or even getting a second job. To get an estimate on how long it will take you to pay off your debt, use a debt calculator http://www.debtmanagers.ca/debt-calculator.php.

How to create your own budget:

  1. Create an Excel spreadsheet.
  2. In your first column, set up the headings “Income” with your source(s) of income underneath, and “expenses” with your different monthly expenses underneath. Column 2 should have the title “Projected Spending”, column 3 “Actual Spending”, and column 4 “Difference”.
  3. For “Projected Spending”, gather credit card statements, bank transactions, phone bills, utility bills, etc. in order to get an estimate on your spending.
  4. Start putting projections beside the right titles. Also keep in mind that your variable expenses might be different. Each month: think ahead for the month to see if you should increase or decrease certain expenses (lunches, gifts, travel, etc.).
  5. Once you have your numbers, the fun begins! Under “Actual Spending” input your daily spending beside the correct headings (keep all receipts throughout the day to have an accurate total).
  6. Subtract your expenses from your income.
  7. And there you have it, the amount of money you have saved (hopefully) throughout the month.
  8. Remember to figure out the difference between the amount projected and amount spent in the month. The reasoning behind this is to see where you are over/under spending.
  9. Take the information you have gathered and see what adjustments can be made to help you reach your financial goals!

It is important to review and adjust your budget regularly. You want to stay on top of your spending and make sure you are within your projected savings. This can be done by regularly looking over your budget to see where you are and make sure you are still on track. Adjusting your budget can be helpful because unexpected expenses can (and will) arise such as car repairs, housing repairs, unexpected bills, etc. In order to hit your goal you might have to go in and change your projected totals so you can reach your end goal.

If we can assist in helping to create your budget, please contact us. We would be happy to help


 

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