Not much can compare to the rewarding feeling we get from working all week in return for our very own paycheque to use as we wish. Knowing that it was your hard work that got you that check may make you want to reward yourself. Waiting for that pay to come in so you can have a little fun and let loose is not always a bad thing, however it is wise to proceed cautiously. Depending on what your definition of a good time consists of, withdrawing more than you can afford to spend may get you into some trouble financially, which will prevent you from covering the amount of your bills, which may result in getting yourself into unwanted and unnecessary debt.
Sure we work for our money but we also have to live within our means. Life often seems to consist of more things that cost money than things that do not; the trick is to find the less expensive things in life to enjoy rather than blowing through a whole paycheque. Life is not free. From paying rent, utility bills, car payments, gas, insurance, food etc. and this does not even cover half of the types of bills that one could be working to pay. In order to get by we must allocate our money responsibly and still have enough money to save for our future. The way the economy has been going it seems like everything is only going to get more and more expensive.
So how does one stay on top of the game and have financial stability? By making your very own budget! Just imagine the amount of stress that will be alleviated just from not having to worry about financial wellbeing. We know that making a budget can be a bit frustrating therefore we put together some tips to set you off in the right direction.
Why are you making a budget?
People make budgets all the time but do not necessarily keep to them, ever wonder why? Anyone can make a budget because someone said it was a good idea but if you are not personally ready, you might not stick to it. The whole idea in having a budget is to help you spend less than what you earn and as a result, save money. Having a budget will show you where your spending weaknesses are and can help open your eyes on how much money you are actually spending irresponsibly. Your budget can help you build structure and get stronger in your spending habits.
When describing a budget the “Training Wheels” analogy might help. A budget is not the solution but instead it is guidance to be able to efficiently and successfully spend less than you earn.
Keep a long term goal in mind
When planning a budget, having a big, long term goal in mind that could make a big impact on your life is extremely useful. For some it might just be living debt free while for others it might be saving for a house or a recreational vehicle. No matter what it is, seeing the progress you make towards your goal is usually incentive enough to keep on track.
Know your income
It is important to know exactly what you are bringing home each week after any income taxes, health insurance payments or any other deductions. This means you cannot base your budget on your annual salary but instead on your take-home pay per month to be used as a starting point to building your budget.
Know your expenses
Based on real numbers of bills, receipts and expenses from the past couple of months you can come up with an idea of what you actually spend. You can categorize each expense to sum up how much each category costs you. Categories can be as general or specific as you wish, for example: automotive, household, utilities etc. Do not forget any irregular bills such as car insurance, homeowners insurance, licence, property taxes and so on. You should not end up with unexpected bills as you should be planning and saving money for them throughout the year, a little bit each month.
Keep a chequing and saving account
Having a chequing and saving account can come in useful for automatic transfers, whether it is to make online payments or to build up your funds in your savings account.
It is important to be realistic when it comes to budgeting as it may end in disaster. Reduce spending in various areas, such as entertainment, a little at a time rather than cutting down a major chunk. You want to stick to your budget, not go all out cutting down expenses the first week only to realize budgeting is not living and quit in such little time.
Set some short term goals that you can easily achieve in order to reward yourself for staying on track. Yes, we are aiming for that long term goal but it is alright to have a little fun in-between. Give yourself a little extra grocery fund and spoil yourself with a decadent treat or set a monthly entertainment budget for an activity that you enjoy. These simple, financially planned treats can give you joy, as well as knowing you didn’t spend outside your means or not depriving yourself now that you are on a budget.
Don’t be afraid to make adjustments
Not everything on your budget is going to be perfect and most of the time the only way to make a successful budget is to make adjustments as you go – similar to trial and error. You can consider the making of a budget to be a learning experience. Perhaps you forgot to include a key piece of information or you forgot to take inflation into consideration but do not panic, this does not mean your budget is a loss, it just means it needs a little tweaking.
Having a budget is basically the best way to keep yourself on track. It saves you from living from paycheque to paycheque, allows you to save for future goals, helps keep you out of debt, and reduces stress triggered from paying bills. Embracing this concept can save you some financial headaches, however you need to be disciplined with yourself as you are making very good, long term financial decisions. Remember, everyone has to start somewhere.