Budgeting – The Other ‘B’ Word

By on November 21, 2012 No Comments

Most people respond to the word ‘budget’ the same way they would if their dentist asked if they wanted some unneeded elective surgery, but the truth is a budget can be the single most helpful tool in your path to debt-freedom.

What A Budget Is NOT

A budget is not a constraint on your life.  Many people, when first trying out a budget, tell us that they feel like their every move is being watched and they can’t do what they want.  That’s kind of the point, but it’s a very negative way to look at things.

The Purpose Of A Budget

The real reason to have a budget is to align your life goals with your financial behavior.

This sounds simple but so many people live in a very different way.  Maybe your life goals are saving for retirement and paying off your credit card debt, but when it comes to spending money you’re going on vacations and buying a second car that you don’t really need.

Step 1 – Focus On Priorities And Goals

Before you even think about numbers and a budget, you have to decide on your goals and your priorities.  You have to accept that you have a limited amount of money coming in every month, and that each dollar WILL end up somewhere.  Deciding your priorities and goals will help frame the conversation about where that will be.

Step 2 – Accept That You Can’t Have Everything

You can’t aggressively pay off your debts while still living your life the way you have been.  Since you’ve already decided on your priorities and goals, now it’s time to realize that achieving them will require some sacrifices on your part.

Step 3 – Write Down Your Income And Expenses

Add up all your income sources so you know how much is coming in every month.

Now add up your expenses.  You have monthly obligations in the form of mortgage payments, utilities, classes, food, etc.  List them out.

Now total up all of your debt payments.  This can be credit cards, lines of credit, etc.

Total up your income and subtract all your expenses.

Step 4 – Make Some Hard Choices

Hopefully the number you’re left with at the end of the month is positive.  If it is, you can start using that money to build an emergency fund and pay off debt.

But it’s probably also a good time to really look at the numbers and see if anything jumps out at you.  We’ve written before about needs vs. wants, and the more you can cut out the more you can add to your debt repayment.  Did you spend $1,500 on restaurants last month?  Try cooking at home more often.

Step 5 – Create Your Budget

Now that you’ve seen what you’ve been doing, it’s time to plan for next month.  It’s best to use an average of a few months as any given month can have some random events that skew your numbers.

Set up a plan for next month and decide how much you can spend on each category.

Step 6 – Be Patient

Your budget won’t work for the first few months.  You’ll forget to account for the extra groceries for Thanksgiving dinner, or that your car is due for some maintenance work this month.  Start paying attention to everything, and know it’ll get better.

Step 7 – Keep The End In Mind

It can be tough to run out of money in a given category before the end of the month.  Run out of restaurant money?  It’s going to be hard at first to say “that’s too bad, let’s eat at home”.  Always remember that the money has to come from somewhere, and everyone in the family has to agree that you can take money from the entertainment fund to pay for dinner this one time.

As you get hit with these tough choices, keep the end in mind.  Every tough choice you make is one step closer to reaching your goal of being debt free.  And once that happens, think of all the money you’ll have for everything!

Get Started

Budgets can be tough, especially with more than one person involved.  But they’re a great tool to focus your energy, aid difficult conversations, and most importantly, be in control of your life.


My Guide to a Frugal and Fun Winter

By Jordann Brown on February 7, 2017

When you’re in debt repayment mode, cutting down on your variable expenses is an important way to free up extra cash to pay off your debt quicker. I did it, and it was a key part of my debt repayment strategy. Cutting down on variable expenses is as simple as ditching any expense that you…

Valentine’s Day on a Budget

By Jordann Brown on January 31, 2017

When you’re on a budget, the most mundane holidays and events can cause financial distress. Does your friend have a birthday coming up? You’re probably already stressing about being able to afford the dinner she invited you to. The same concept applies to holidays, including Valentine’s Day. Listen, I understand. No one wants to be…

TFSA vs. RRSP: Where to Start Saving for Retirement

By Rubina Ahmed-Haq on January 23, 2017

After landing your first full time job the advice is often to start saving for retirement. Now it can be hard to convince a young person to put money away for an event that’s 40 years in the future. But what can be even more difficult is understanding where to save that hard earned cash….

Tackle holiday debt now

By Rubina Ahmed-Haq on January 13, 2017

The holidays are expensive. We know that. According to a recent survey from savings destination, the average Canadian spent almost $1000 this past holiday season on food, drink, travel and gifts. Another survey by PC Financial finds 77 per cent agree the holiday season tends to be more expensive than planned. If you went over…

No Comments Leave a Comment  

Leave a Comment

Free Savings Estimate

How much do you owe?


Live Chat
Welcome to our Live Chat
Agents are not available at this time. Please leave a message. Thank you.
First Name
Last Name
Postal Code
Debt Amount
PHP Live! powered