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Budgeting 101.

Kerri Barreca

Some people are just natural savers.  As children, when my mother gave my brother and I our weekly allowance, I would put it straight into my piggy bank while my brother would spend his the same day on candy or baseball cards.  For those whom saving does not come naturally, like my kid brother, it’s extra important to exercise good financial planning skills and create and stick to a budget.


Take a look at how Bernice, a Credit Canada client, was able to build financial planning skills by meeting with a credit counsellor.  She learned that in her case it’s best to only use cash  for purchases, that she doesn’t need a credit card, not to spend money she doesn’t have and how to create a budget that works for her based on her personal income and expenses.  Three cheers for Bernice and everyone else who has taken hold of their personal finances!  There are many ways to track your spending and once you get in the habit of doing so it will become second nature.  Here are some practical ways for consideration to get you started on your financial planning:

    1. Track your spending for one month- Take a 30-day challenge to see where your money really goes! Feel free to use this budget tracker, as a way to better understand your spending habits. Once you see where your money goes every month you can make decisions about what to cut back on.  Be sure to add your purchases to the list right away. If you put it off, you are more likely to forget the little purchases like morning coffees that that tend to add up over time.  Don’t rely on your receipts either as not everything you spend money on necessarily has a paper trial (eg.  Paying your niece 20 bucks to babysit Saturday night).  After the month is up, take a good look at how much you spend on entertainment, on gifts, on personal grooming etc. Decide if these amounts make sense in your financial situation and then see where can you make cuts if need be.
    2. Plan for annual expenses- Try to set money aside in a separate account every month so when surprise expenses arise (eg. unforeseen car repairs) or annual expenses are due (eg. licence renewal) you don’t need to rely on credit.
    3. Establish goals- Take time to consider what your financial goals are. Think short term, “I’ll brown bag my lunches at least 3 times per week”, intermediate “I will start saving to contribute to my RRSP” and long term “my dream home”. Financial goals should come with a strong financial plan.
    4. Take cash out weekly- Try living on a cash allowance for personal expenses. Budget an amount to withdraw from your account weekly or monthly to use on extras like the movies, the salon and cappuccinos.   When it’s gone, it’s gone until the first of next month so spend wisely or you may have to wait until next month to get your bangs trimmed!
    5. The envelope method- Another strategy to help match your planned budget to your actual spending habits is to categorize your expenses and divvy up funds for the whole month using jars, envelopes or whatever works practically for you. For example, if someone’s net income per month is $3000, the rent envelope may hold $1000, the food envelope may get $300, the transportation envelope may have $130 etc. continue on until the full net income has been divided up fairly.  By seeing in the envelope how much is left to last you the whole month, the idea is that you will be motivated to stay on track and make wise spending decisions.  Can you guess into which envelope any extra money should be put once the basics are covered?  You got it…the savings envelope (to be later deposited into a savings account)!
    6. Balance a cheque book-Finally, there is also the old school way of keeping track by using a cheque book to track all your payments that go in and out of your bank account. It’s a great way to keep organized and to avoid overdraft.

So try one, try two, or three of these budgeting tips and see what works best for you and your financial fitness!

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