How to Create a Budget

Remember when your parents would ask you to do something and the first word out of your mouth was, “Why?”

Budgeting is a lot like that. You’re making money, you’re spending money, no one seems to be getting hurt, so why do you need a budget? 

That’s the biggest part of budgeting: knowing why you need it! Maybe your credit score is getting hurt because you’re spending too much without paying it back in a timely fashion, maybe you want to buy a house in the near or distant future, hey, maybe you just want to take a course or add a couple extra streaming services. Maybe it’s all of the above.

Budgeting removes the fog in understanding what you should and shouldn’t do with your money and reduces the anxiety of managing it all. It’s a financial selfie and it’s not something you have to share with the world. Knowing how much you can spend, how much you can save, and even how much more you need or want to earn to live your best life can all be answered with a straightforward budget.

How to start For those who prefer the automated route, websites like Mint.com (also available as an app) can upload all your banking information into one spot and break down everything you’re doing. Whether it’s Numbers (Apple) or Excel (Windows) or Sheets (Google), you can also easily track things yourself.

Easy-come, easy-go Record all your expected after-tax income and all your fixed expenses. This is the biggest part of your budget and will let you know exactly what your big picture looks like. Fixed expenses will include your mortgage/rent, groceries, utilities, and other regular monthly payments such as your phone bill, car leasing or finance plus insurance, or transit pass, and yes, your subscription services. The more detail, the better. COVID times are an exception, but in a regular world staying on top of how much you’re spending when you go out to bars, restaurants, and other extracurriculars is huge in identifying areas for improvement.

All-in on GOALS We already talked about listing your financial goals and understanding why you’re doing this but take it one step further and include them in your budget as an expense. Seriously, go nuts with this one. Monthly budgets like “Cancun” or “new house” will motivate you to direct your money in a meaningful direction. Date night with the bag Congrats on doing the hard part, now you just need to check up on your money and goals once a month and recognize the changes you may need to get there. If you’re absolutely nailing it, keep kneading that dough! Ok, but what am I looking at and how do I know if I need to change? If you’re spending more than you make, there’s a problem and you need to adjust accordingly. If you’re making way more money than you spend, ensure that money isn’t just sitting idle in your bank account waiting to be spent. Put it away in a regular savings account, TFSA, or RRSP. A general rule of thumb is that you should be aiming to save at least 20% of what you make and you can’t get there without understanding your spending.

Creating a budget is the first step to being the best future you, and it can’t be stressed enough how easy it is.