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by Janet Doyle
If you’re new to managing money or if you haven’t mastered it yet then budgeting may be intimidating. At the same time, it can be the one thing you do that ensures accomplish the many goals you may have including staying out of debt.
By taking control of your income and expenses, you’ll have the ability to make your money work for you – and not the other way around!
Set Financial Goals
Let’ start with the fun stuff to get us motivated to deal with the less than exciting part of budgeting. Are you hoping to make a fun purchase like a bike, paddleboard, or planning a vacation? Perhaps you want to become debt free, save for retirement, your children’s activities or their future. Start planning the purchase out now by researching the best value and what will fit into your budget and you’ll enjoy working towards your goal that much more.
Budget
Now that you’re excited about making that new purchase, let’s figure out a plan to get there. Budgeting is the best way to start saving and provides you with opportunities to trim your expenses and meet your goals. Tracking your expenses will allow you to examine where your money is going and opportunities for you to cut back or save. If you have online banking tracking your expenses can be as easy as looking up your monthly statement or you can use an app to help you track expenses. Remember that your budget is a starting point, and give yourself about 3-4 months to track expenses and income so you can compare your estimated costs against your budget. Pay special attention to credit card or financed purchases – the interest can add up and end up costing you more than you think!
Include an Emergency Fund
Wait! I thought you said I get to save towards the purchase that I want?
Yes, you do, and you don’t want to get sidetracked by emergencies on the way!
Everyone faces unexpected bills such as vehicle repairs and housing costs – and given that 49% of Canadians don’t have an emergency fund, it’s no surprise that unexpected bills can cause debt to accumulate faster than planned. If you’re planning out how to spend your money you need to take into account the potential of unexpected expenses, and a necessary cost such as a vehicle or housing repair or even a job loss or injury can seriously jeopardize your financial stability. A good place to start is to save one to three months of expenses.
Adjust
Next you need to find out where you can create more money. If you have high credit card debt that’s costing you hundreds of dollars in interest a year, consider paying down the debt to limit the amount of money you pay in interest. While this means you won’t have as much cash saved up, over the long term you’ll end up with more money in your pocket. Examine the expenses you’re making and where you can save money:
Phone/Cable/Internet Bill – Can you save money with a new plan, or maybe cut the cable cord for the summer (after the Stanley Cup Playoffs of course!)?
Groceries-If your grocery bill is higher than expected you can start meal planning and start planning your meals around deals on food. Consider what you can buy in bulk for a better discount, or what pre-made or packaged foods you can make yourself to eliminate the price you pay for convenience.
- Utilities – Examine utility bills and make efforts towards reducing usage by using warmer clothing and slippers to keep warm in the winter and foregoing air conditioning in the summer. Did you know that a 49 inch LED TV can consume more than 4 times as much electricity as a 32 inch TV, and a 25 inch colour TV uses twice as much? Two of the biggest consumer of energy in homes are dishwashers and clothes dryers, both options you can do without! You can find a great guide to common appliance energy consumption values here.
- Install a programmable thermostat to control the temperature when you are out of your home.
- Seal air leaks around windows with weather-stripping and caulking.
- Use more efficient LED lightbulbs
- Insulate your hot and cold water pipes with 2 metres of foam or insulating wrap (Leave a 15 inch gap for vent pipes on fire fuelled heaters)
- Consider cutting your cable tv subscription during the summer months when you can spend more time outside.
- Buy/Sell – If you need to purchase furniture, kitchen appliances, or other items for your lifestyle consider looking at Facebook Marketplace, thrift stores, or Kijiji.
These are just a few ways you can find extra money to put towards your goals; budgeting allows you to examine your spending and control your financial future.
Hopefully these tips provide a starting place for you to create your own budget. If you have been budgeting and are finding there are more expenses than income each month and you are unable to manage your payments due to debt, we offer a free consultation to help you determine your options for debt management. Contact us to book your appointment and speak with a professional for debt relief help in Ontario and Quebec.