When you own a property, your expenses are often higher, and it is wise to plan your budget. You don’t know how to do so effectively? Here’s some practical advice!
It takes discipline to implement a financial plan. It is not unusual for people to manage to follow it for a few weeks before slipping into their old spending habits. Why? Probably because the budget they put in place was inadequate and not sufficiently flexible. Read on to get some tips that, we hope, will improve your financial situation!
1— Determine Your Income (and Be Honest)
If your income varies from month to month, it can be difficult to determine the right basic amount. You can calculate an average over a set period, or plan based on your minimum income. It is better to be realistic and underestimate than overestimate!
2— Add Up Your Fixed Expenses
Your fixed expenses are those that do not change from month to month, such as your mortgage, hydro, car and cellphone payments, your contribution to your child’s RESP, daycare, reimbursing that loan from your brother-in-law, etc. Don’t leave anything out!
3— Add Up Your Variable Spending
These expenses are difficult to calculate since they vary from month to month. Groceries, eating out, clothes and gas rarely come up to the same predictable amount every time you go to the checkout to pay. Our tip: this is where it is safest to overestimate what you will spend.
4— Savings, Emergencies … and (Most Importantly) a Few Extras
Ideally, you should be putting aside 15% of your income into savings. Place in a TFSA if you plan on using this money relatively soon; otherwise, invest in an RRSP. Consider your savings an emergency fund to cover unexpected expenses like car or home repairs. Alternatively, it could also be an amount you slowly accumulate for a romantic weekend at Mont-Tremblant or to splurge on that pricey pair of heels you’ve been eyeing. The secret to sticking to your financial resolutions is to allow room in your budget to treat yourself from time to time.
5— Give Yourself the Right Tools
Technology to the rescue! There are all kinds of apps out there you can use to plan a detailed budget, receive payment alerts, get notifications that your savings account is almost empty, or warn you that you have overspent (oops!). It is also worthwhile to contact the various service companies that comprise your fixed expenses to set up equal and automatic payments. In this way, planning and following your budget will be easy and stress-free, and you can avoid any oversights.
6— And Most Importantly, for a Lean Budget, Trim the Fat
To really get started on the right foot with a new budget, use this opportunity to cut back on all unnecessary expenses. An unnecessary expense could be the membership to that gym you never go to; unused telecommunication services; your monthly hairdressing appointment; your subscription to a meditation site that you forgot all about; continuing to heat the pool in September after the swimming season has well and truly ended, etc. This step does not mean that you must renounce all your little pleasures or luxuries. If paying for a housekeeping service makes you extremely happy, then there is no need for you to give it up. Take a good hard look at your actual lifestyle and you will no doubt find some things you can eliminate. And if moving into a cheaper home is what you need to do to live more freely financially, don’t hesitate!
Now all that remains is to adhere to the limits you have set and never give up. If you need some extra help, a financial institution can work with you to sort out your finances. Feel free to contact them!