Start a budget

How to Start a Budget

Keeping a monthly budget is an essential part of healthy finances, no matter how much money you make. A budget is simply a plan for where your money will go before you spend it. But it can be daunting to get started. If you haven’t started to budget yet, you are not alone. Less than half of Canadians keep a regular budget. But budgeting is one of the best things you can do for your finances, relationships, and personal well-being. Thankfully, learning to budget is not hard. If you’re ready to start making healthy financial habits, consider this information for how to start a budget.

Find Your “Why”

Before you start crunching numbers, take the time to understand why you want to budget. What are your goals? What benefits do you hope to receive? Why is it worth the commitment? Having a clear idea about your reason for budgeting will help you make better decisions and stay on track with your goals.

Some common reasons for starting a budget include:

  • Getting out of debt
  • Staying on track toward long-term financial goals
  • Reducing problematic overspending
  • Ending fights about money with family
  • Making sure your spending aligns with your goals and values
  • Stopping living paycheck to paycheck
  • Finding ways to save more money
  • Save toward an Emergency Fund

If you are in debt and wondering how to start an emergency savings fund – this podcast is for you. You may have to start small but start now.

Do the Budget Together

Budgets are more successful when everyone in your household is on the same page. If you have a spouse or partner, sit down once a month and have a family budget night. If you’re single, find an accountability partner who will help you stick to your spending goals.

Having the whole household involved will make reaching your budgeting goals easier and more enjoyable. When everyone is committed to the budget, you’re more likely to stay on track with your spending goals. Making budgeting a monthly ritual will help make budgeting a habit that sticks.

Be Realistic

A good budget starts with tracking all of your income and actual spending. The more accurate your budget is the more effective it will be. If this is your first time making a budget, start by tracking all your income and spending for one month to get a realistic idea of where your money is going.

Your income will include the available income you take home after taxes and other deductions. It does NOT include overtime pay or any sources you don’t rely on as regular income.

To get a better idea of your expenses, take a look at your checkbook register, credit card statements, and store receipts. Separate your expenses into fixed and flexible expenses. Fixed expenses include things like:

  • Rent
  • Loan payments
  • Car payments

Flexible expenses vary month to month and include things like:

  • Food
  • Clothing
  • Entertainment

Your budget doesn’t have to be perfect down to the last cent. But a budget only works if you’re honest about both your income and expenses.

Looking for tips on how to reduce your housing costs? Our Licensed Insolvency Trustee, Derek L. Chase offers suggestions in this podcast. 

Start with the Most Important Categories First

These are things like food, shelter, transportation, and basic clothing. Putting aside some money into your savings should also be at the top of your list. Once your true necessities are covered, you can fill in the rest of the categories of your budget.

Focusing on your necessities first will help you:

  • Get a realistic idea about how much money you can spend on other categories
  • Stay out of debt even when your budget is tight
  • Prioritize non-essential spending

Every Month is Different

Adjust your budget each month to account for changes in expenses (Hint! Christmas is in December again this year). Taking time to update your budget each month will help reduce stress about changing expenses. This could include things like:

  • Birthday gifts
  • School supplies
  • Holidays

One way to do this is by adding a bit of wiggle room into your budget. If you have the means, $50-$100 a month is a good number for most people.

Try an Online Budgeting Tool

The only tools you need to start budgeting are a pencil and a piece of paper. But to make things even easier, consider using a free online budgeting app. There are plenty of apps to choose from. If you’re looking to get started, check out Mint or EveryDollar.

Be Patient with Yourself

Budgeting is easy once it becomes a habit. But it’s OK not to get it right on the first try. Learning to a budget takes about 3 months. Once you’ve got a few months under your belt, budgeting will feel easy. Don’t give up, you’ll get there!

We Are Here to Help

Keeping a monthly budget is one of the first recommendations we give, no matter the financial situation. But we realize that sometimes the burden of debt can be too much to fix with changes to your financial habits alone. In these situations, a Consumer Proposal or assignment into Bankruptcy can be the best way to get relief from your debts and find a fresh start. If you want to jumpstart getting ahead of your debt we would recommend seeking some professional advice.

Whether you’re struggling with debt or looking to take control of your finances, we’re here to help. At our office, we offer a free, confidential, and judgment-free consultation where we will take a look at your financial situation and offer some suggestions as to how to proceed. This meeting will equip you with the information you need in order to make the right moves for your future. Reach out to one of our convenient offices to book your free consultation now.

D. Elinor Warner

I have been working in the insolvency field for over thirty years! I continue to enjoy the daily variety the day brings and the opportunity to increase my knowledge with mandatory professional development courses. It has been a pleasure to assist people in financial difficulty navigate the insolvency process of their choice and see them achieve the fresh start they are looking for. Over the years I have volunteered time with various organizations in the community. I also enjoy listening to a variety of music and attending concerts, as well as reading, cooking, gardening, travel, and spending as much time as possible with my two children, her extended family and friends.