How To Create a Monthly Budget

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Tracking your personal expenses and maintaining a household budget may sound like a hassle, but Credit Canada makes it easy with our free budgeting tools. Using these tools, you’ll be able to find financial freedom and achieve debt relief. Now, we’re not going to lie and say there’s no work involved; you need to be disciplined in your approach to make this work for you. But in the end, you’ll have a clear picture of how much money you have to spend based on your income—and where you’re spending it. Here are some quick links to our free budget tools and budgeting worksheets, and keep on reading to learn more about how to use these tools to create a monthly budget.

Debt Calculator

  • This tool enables you to plug in your debt balances and interest rates to determine how long it will take you to be debt-free using different repayment strategies.

Budget Planner + Expense Tracker

  • Budget Planner Section. On the first tab of this tool, you’ll plug in some personal financial information, such as your income, expenses, and debt. This lets you see how much money you have coming in and how much you've got going out on a monthly basis, giving you an overview of your housing costs, living costs, work expenses, and personal expenses as well.
  • Expense Tracker Section. The next five tabs are used to track your weekly expenses. When used in conjunction with the Budget Planner, this lets you see if you’re meeting your financial goals. The last tab will give you a final monthly report showing you whether you’re over or under budget, and how your spending compares to the average Canadian.

5 Steps To Create A Monthly Budget For Smarter Saving

1. Create a List of Expenses and Income

Wondering how to budget? It’s easier than you think with our free tool. The first step to making a budget is determining how much money you have to spend in an average month. This would be your net income, or what you earn after taxes. Next, you need to figure out how much you spend on various items each month — including paying back your current debts — and then see how this measures up against your net income. (Read more in our blog How Much Money You Should Spend on Monthly Expenses.)

Putting your income, expenses, and debt down in writing will help you manage your money and track your spending behaviour, so you’ll be in a better position to fulfill your financial goals. It’s recommended that you try to save 10-15% of your net income. If you're unemployed, try to save 2-3% of any income you receive.

We’ve created a simple budget template in the first tab of our Budget Planner + Expense Tracker tool, which you can download by clicking on the link below. Your net income should be fairly easy to list; only include regular sources of income that you expect to receive over time. Listing your expenses and spending, however, will require a little more work which we’ll get to next.

Start Using the Budget Planner Now

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2. Begin Tracking Your Expenses

Like most people, you may not know where all your money goes after covering obvious living expenses, like your rent or mortgage, car payments, utilities, etc. This is why you should track your monthly and daily expenses when you first start putting together a personal budget, including even small purchases like coffee, snacks, gum, etc. After all, these seemingly inconsequential expenses can quickly add up!

You should track your spending for at least a month (ideally 2-3 months) every day at home, at work, and at play. This will help you create a detailed spending plan you can follow in the months ahead. On tabs 2-6 of the Budget Planner + Expense Tracker (or week 1-5), you’ll start to plug in all your different expenses when you spend your money. As you track your spending week to week, the tool will automatically be comparing your spending to your planned budget in tab one. You’ll find this summary detailed on the Final Monthly Report tab.

Start Tracking Your Expenses

3. Set Realistic Financial Goals

Next, you'll then need to write down your short, medium, and long-term financial goals based on your needs, wants, and dreams in life. Short-term goals might include saving up for a new cell phone or a vacation; medium-term goals might include saving up for a car or a down payment on a home; long-term goals can include saving for your retirement or your child’s education. Of course, you need to be realistic about what you want, need, and can achieve based on your current income. If you set unachievable goals, you’re setting yourself up for failure and further frustration.

By understanding your spending habits, your money-saving goals, and what you can expect to have left over, this will seem like less of a challenge and you’ll be able to be reasonable with your goals. Just keep in mind that circumstances and goals in life can change, for better or for worse, so you should be prepared to re-evaluate and revise your budget every so often.

Read More: How To Create SMART Financial Goals

4. Set Budget Priorities 

Every personal budget breakdown needs to have a purpose, otherwise, what's the point of doing all this work? For those in debt, your first priority should be paying it down. Our Debt Calculator can show you how long it can take to be debt-free using different payment strategies. For those free from debt but short on savings, you’ll want to start an emergency savings fund that can cover 3-6 months’ worth of expenses. This way, in the event of unforeseen circumstances (i.e., car breakdown, health issue, or job loss) you’ll have some money on hand and not have to reach for those high-interest credit cards. The good news is that by simply creating a monthly budget, you can gain insight into where you can cut back on your spending in order to pay down debt or save up money. 

After you’ve completed one month of tracking, your final report will show you whether you’ve come in over or under budget. You’ll then want to look back at your Budget Planner and make adjustments that reflect your true spending. Want to know how much money you could save by cutting out a few small items from your spending? Try using our free online Budget Calculator.

5. Set Up a Savings Account 

When you make a budget, you should also plan to save some money for the fun things in life, too. Otherwise, you’re going to burnout! This means paying yourself by establishing a regular savings account. This account is different from an emergency fund. Your savings account should only be used to meet your personal financial life goals, which we talked about earlier.

So, every time you receive income, take a small percentage and put that money into a savings account, like a Tax-Free Savings Account (TFSA) or some other type of investment vehicle. Your bank can help you set up automatic withdrawals to take money out of your main account (usually your chequing account) and put it into a savings account every time you get paid. That way, you’re not tempted to spend the money (out of sight, out of mind, so to speak) and instead can let it grow over time. You can also set this up yourself if you use online banking.

Read More: How to Drastically Cut Your Expenses and Get Your Finances on Track

After You've Completed Your Monthly Budget

The most important skill for financial health is the ability to budget. Get expert advice on how to budget and why it’s important to budget from a group of experts including credit counsellors, account administrators, and educators in this video testimonial

Now, it’s time to take control of your financial goals and future! Our Money Management and Budgeting Guide has valuable information and tips that can set you up for success. 

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If you’ve tried budgeting before without success, and our free tools have you scratching your head, don’t hesitate to contact us for free and confidential advice.

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