For the Love of Budgeting
Personal finance and the knowledge behind how to handle money is something I am super passionate about. I have always been a planner and I love to look ahead and feel prepared.
I once worked as a front-line advisor at a local credit union, and from that experience I learned how little some people know about finances, and how important it is to understand your money.
I don’t pretend to be a financial expert, but everything I provide in this post are things that I, an over-planner and passionate finance gal, have tried and loved in my own financial journey.
Here are the First Three Steps I took in my Money Journey…
Track Your Spending
The best way to get an idea of where your money goes is to track your spending for two months. There are two ways to track your money easily to see how much you spend (exactly) on groceries, gas, insurance, coffee, etc.
Option One: Keep a money journal. Write down (each day) exactly what you spent and what you spent that money on. This works if you already have a monthly planner or regularly take notes on your phone.
Option Two: At the end of each month, go through your transaction record on your online banking and credit card statements. This works well if you spend all your money on a card, not cash.
Allocate Your Money
I listened to a great podcast episode last week by Adulting with Oenone Forbat and Caroline Hughes where they gave some great advice on money and budgeting. One insight they gave is to pick a percentage of your money to save instead of a set amount.
Types of Expenses:
Bills: This would include rent, mortgage, insurance, utilities, and any costs that are the same each month.
Spending: This includes eating out, clothes, tire changes, etc. Anything that changes month-to-month.
Saving: Saving looks different to everyone. It could be a regular contribution to your TFSA or investments or a savings account. The important thing is to put aside a little every paycheque.
For some people it may work to use 50% of their income for bills, 30% for spending, and 20% for saving, for others it may work best to only allocate 5% for savings, etc. Whatever your financial situation, it is important to make a budget by first understanding what percentage of your income goes to each set of expenses.
I recently updated my budget using tips from this handy club thrifty blog post on how to utilize excel and create a budget spreadsheet. Here I have included my exact layout in case you would like to model yours off of mine.
To be clear, this is not exactly what mine looks like, but it is pretty close. I customized mine a bit more to fit my exact spending, but this is a good template to explain the layout. You may be wondering how this works after you have your layout, well…
The two purple boxes should have your total planned income. The purpose of this kind budget is to allocate all your income, that is why the total planned spending is the same as total planned income.
The two yellow boxes should have your actual income (which will be the same as your actual total spending). Your actual total spending is what you will have allocated over your expenses and savings.
The sum of your two red boxes should equal your total planned income. This is because all of your planned income should be allocated over your planned expenses and savings.
The sum of your two blue boxes should equal your total actual income. This is because all of your actual income should be allocated over your actual expenses and savings.
This budget is useful to see where all your money goes, and make sure you are allocating all of it — I found that after I filled it out, I discovered some extra money that I was spending instead of saving. Another nice thing about this layout is seeing how your planned budget differs from your actual budget.
I hope this post provided some valuable information about budgeting. Drop me a line to firstname.lastname@example.org if you have any questions or comments.
Good luck on your financial journey!