It's easy to set aside some money for rent and insurance payments, but no so much for seasonal or occasional expenses. Did you save money for Christmas presents and back-to-school material? These are only two examples of what could give you a major headache if you don't plan for them!
Writing everything down on paper will allow you to make choices and plan ahead to save money. If you want to add a dream or a project to your life, making a budget becomes the key to making them a reality.
How
The person who is better at managing cash and has difficulty managing different bank accounts can use our ancestors’ method: having a different envelope for every bill in which you place money every month (or every paycheck). This way, you will have an envelope for rent, for groceries and insurance, but also for gifts, leisure, books, trips, etc… Good self-control is a must, otherwise, you will end up taking money from the envelopes for “emergency” purposes and your budget won’t be effective.
The person with a habit of spending all his/her money immediately should go with bank accounts and have money transferred automatically to different accounts. Having money transferred automatically is a great way to pay your bills and verify how much money is left over. Don’t hesitate to ask that the payments' due date be set for mid-month rather than at the beginning when spendings tend to multiply.
Basic budget
You can have a daily, weekly or monthly budget. The more specific your budget is, the more precise your finances will be. If you have a job and get paid every two weeks, it may be a good idea to make a budget according to your pay period.
Start your budget by calculating your total income: paycheck, government benefits for children, alimony, tax return, etc… In another column, write all your expenses starting with all recurrent expenses such as rent, electricity, phone, insurance, etc… Follow with the expenses that vary from one week to another. For example, you have to make a realistic projection of your weekly grocery spendings, keeping in mind that because of the abundance of fruits and vegetables in summer, groceries will be less expensive during that time of year. As far as clothes are concerned, the same logic applies: you spend a lot of money at certain times of the year and almost nothing at other times.
During the back-to-school period, you will probably spend more than you make! People who haven't put money aside will get a bad surprise when they receive their bills. There are perishable school supplies (pencils, stationery, etc), mandatory notebooks, books, school bag, lunch box, daycare, clothes, haircut… Some schools ask for a second pair of shoes to go outside, others ask for a contribution of tens of dollars for school trips. And let’s not forget that your child may also want to get involved in sports or a community activity during their free time! Oh, and the extra money you’ll spend on cafeteria food or lunches. Ouch!
You must also plan for the long-term: the family trip you promised a long time ago, the renovations, and the kids' higher education (which will come faster than you think). Knowing that it will cost over $100,000 for your child to go through university in 20 years, it's very important to plan ahead.
RESP
The Registered Education Savings Plan (RESP) is a great way to cumulate tax-free savings while still benefiting from an important federal subsidy. Since 1998, the Government of Canada provide a grant to the Canada Education Savings Grant (CESG).
Need help?
- The CTF (Canadian Tax-Foundation) offers classes on how to make family budgets and better organize your personal finances, as well as individual meetings to get information and advice on a difficult personal financial situation. For the listing of the CTF organizations in your region, visit the website.
- The Canadian Banker’s Association's website offers a lot of information and advice on budgets, savings, expenses, income, savings plans, etc.
- Most people spend money on things they don’t even remember about by the end of the week. Industry Canada offers a “calculator” that demonstrates the positive effects of saving money instead of spending it all.
- How to make your own budget by using Excel? On this website, you will find the necessary information to create your personal budget according to your needs. A great way to keep up with you finances and stay in control!
