7 easy steps for building a budget
If you have avoided making a household budget because you think it’s a restrictive tool that will cramp your lifestyle and prevent you from having fun, think again. In fact, a budget ensures that you’re spending wisely, and always with your financial goals in mind.
Setting up a budget takes a bit of time and rummaging through old records and receipts, but it’s very simple. Start by writing down the following information:
- All sources of income. That includes salary, rental income, dividends, interest on deposits, etc.
- All recurring monthly expenses. That includes rent or mortgage payments, utility bills, house and car insurance, life insurance, alimony or support payments, transportation expenses, daycare etc.
- All non-fixed monthly expenses. Using bank statements and receipts, try to estimate what you spend monthly on food, clothing, personal grooming, donations, allowances, gifts, entertainment, magazines and books, tobacco and alcohol, etc.
- List your financial goals. Are you saving for a vacation, a new house, a new car, a child’s wedding, debt repayment, retirement? List all the goals you are hoping to achieve.
- Determine what you have left at the end of the month. Subtract the totals from steps two and three from step one. That total is the amount of money you have left at the end of the month based on your current spending habits.
- Make a plan. Look closely at where your money is going and determine if what you’re spending it on is actually a priority, based on your listed financial goals. If that dinner out is a want and not a need, consider making an inexpensive meal at home. But if having a nice dinner out once a week is one of your goals, look to see where else you can trim your budget to make it happen.
- Revisit your budget. Your priorities may change as time passes, so sit down and revaluate your budget every six months or so to determine if you need to make any adjustments.
It may sound like it’s limiting, but a budget really does set you free because it’s not about spending less, it’s about spending on what you love. Balancing your outgoing funds with your incoming funds is the only tried and true way to make sure you don’t spend more than you earn, and that you can save your hard-earned money for the things you really want. Plus, knowing exactly where you stand gives you incredible peace of mind.
Check out our free, printable budget worksheet to help you develop a household budget for your family. If you want even more help, our Everyday Money benefit is a toll-free, personalized and confidential phone-based financial helpline that gives you access to accredited counselors who can answer your questions about day-to-day management of your money. All you have to do is call toll-free 800 444 3043 to speak with an Everyday Money counsellor.
In the meantime, check out these budget-friendly articles to help you save money all through the year:
- Eating organic on a budget
- Back to school on a budget
- Entertainment on a budget
- Budgeting help during the holidays
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