Tax documents: For all tax receipts, see mailing schedule.
While creating a personal budget may not be on the top of your to-do list, it is a tool that is very effective in helping to manage your money. Creating your first budget is the most difficult, but it will get easier to update and investing the time will save you a lot of headaches and money down the road.
Creating a budget doesn’t need to be complicated. Use a pen and paper. Build a spreadsheet if you know how. Regardless of what format you use, the end goal is the same – comfortable, sustainable financial management. We are here to help simplify the process in 5 easy steps.
Step One - Define your income
For most people, this one is easy. Look at your pay cheque and whatever the net amount is after taxes and deductions is your true, usable income.
If you have a job where your income varies - for example if your income is fully or partially based on tips or commission - then base your income on an average of six months or a year.
If you have multiple sources of income - for example investments or a rental property - ensure all your deductions and taxes are taken into account before you put that additional income into your budget.
Step Two - Be realistic about your expenses
It's important to identify fixed expenses (mortgage, rent, car payments, insurance etc.) also your variable expenses (phone bills, streaming services, gym membership) and even your seemingly minimal expenses, like that one coffee purchase a day. Big or small, they all need to be tracked to give you the most realistic budget possible.
Gas and groceries might seem like variable expenses, but you need to get places and you need to eat. For these types of expenses, be realistic with what you need to buy and where you need to go. This is where budgeting and planning is vital.
Your bank or credit card statement is a great place to look at an itemized list of your spending. Sometimes they even categorize the expenses for you!
Step Three - Use budgeting tools and calculators
You could use a pen and paper or Microsoft Excel to create a budget if you like, but there are also a plethora of free or paid tools available on the internet you can use to help you plan and budget. These tools offer a great opportunity to see the impact your savings and spending will have in the short and long term and will help you organize and manage your various expenses. Most are super user-friendly and provide a lot of added benefits, like planning and insights. When it comes to budgeting, organization is key. Don’t underestimate the value of these online tools.
Step Four - Set attainable goals
Knowing how you spend your money every month is important but, it's also good to know how much money you can and should set aside for savings, retirement, vacations or other large purchases. Make a list of financial goals you want to accomplish in the short-and long-term and build savings into your budget to help you get there in a realistic amount of time. If you need guidance to understand what your long-term needs should be, engage a financial specialist who will help you plan for your present and your future.
If your savings don't match up with your short and long-term financial goals, then define a way to increase your income or reduce your expenses. If you find yourself short on cash every month, go back to step two and re-evaluate where you can cut costs.
Step Five - Monitor Your Income and Expenses
Your budget will likely be fluid. You may get a bonus at work or inherit some money, or need an expensive car repair. Constantly monitoring and sticking to your budget is important to helping you achieve your financial goals.
Struggling to create a budget? We help people all the time manage their finances. Give us a call and we'll help you get there.