By Jasmin Brown - Licensed Insolvency Trustee

BDO First Call Debt Solutions

How to find a budgeting strategy that works for you

Nov 13, 2019 | 9:51 AM

Whenever there is a new survey or poll about the state of Canadians’ personal finances, we hear from debt help professionals (like myself) and other financial experts about the real need to have a budget to help people overcome their affordability and debt challenges. Yet a significant number of Canadians simply don’t budget, which could be for a number of reasons. They may think it’s too complicated, too restrictive or simply not worth the effort.

The reality is, budgeting really is a valuable financial tool.

A budget helps you…

· take control of your day-to-day and long-term money management

· set short and long-term saving goals

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· stick to a debt repayment plan

· avoid debt by planning ahead for major purchases

· prepare for money emergencies and unexpected expenses

· plan for a secure retirement

Still not convinced? Even if you haven’t found a budgeting method that you love (or have been able to stick with), don’t give up. More than ever, there are user-friendly ways to create and manage a budget and keep your debt in check. Here are a few:

Budget worksheet or online calculator – If you like seeing every expense, spending and saving category detailed on a spreadsheet, this method is for you. Of course, you can create your own Excel worksheet. But to make things much simpler, try this simple budget worksheet, online budget calculator or even an entire budget bundle.

Budgeting apps – If you’re firmly entrenched in the digital world, why not a digital budget? There is an almost endless array of money management and spending tracker apps that let you manage money on the go, on your mobile device. Many are free and some will even integrate investing into your everyday spending. Here is one website’s list of their favourite budgeting apps. Your bank may also have its own mobile banking and budgeting app.

The non-budget budget is a good strategy for people who want to keep the budgeting process as basic as possible. A detailed budget can be frustrating for some people. When they find themselves spending beyond the limit of each category, they can get discouraged and throw financial management out the window. That can lead to overspending and taking on debt, rather than reducing it.

Most simple budgets involve having a good understanding of how much you need to include in the following “buckets” listed below. It is a good idea to track your spending and expenses for a few months before you try a simple budget.

1. Your fixed expenses – These are the absolute necessities that must be paid each month, like mortgage or rent, groceries, utilities, child care, insurance, debt/loan payments, fuel, household essentials and clothing. Add these up and you have your fixed expenses.

There is a bit of give and take in this category. For example, you obviously need groceries and clothing, but you have control over whether you buy the absolute basics or splurge once in a while.

2. Your savings goals – Think of this as the “pay-yourself-first” category – especially when you are planning for retirement. Whether you have one savings goal or many, decide how much you can afford to contribute, then set up automatic deposit(s) directly from your paycheque. Some people prefer to create a separate savings account for each savings goal.

Long-term savings goals would include items like your retirement and your children’s education. Short and medium-term goals might include an emergency fund, an annual vacation, a down payment on a home, a renovation or a larger purchase like a refrigerator.

3. Your discretionary spending – Whether you view this spending as “wants” or “needs”, what you have available for discretionary spending each month will depend on your financial situation.

discretionary spending = your take-home pay (after taxes and automatic savings are deducted) minus your fixed expenses

Remember, discretionary spending is just as the name implies – it’s money spent at your discretion. You may decide to dine out more often, sign up for a gym membership or enroll your child in dance classes. Or, if your goal is to pay off your credit card debt ASAP, you can even direct some of your discretionary spending towards fast tracking debt repayment.

As personal finance blogger Desirae Odjick explains, any simple budget requires that you map out everything. Make sure that your necessities, retirement and emergency fund are included. Adjust your budget when your financial circumstances change. And, stop spending when your money is gone each month.

Chances are, not every budgeting strategy will work for you. Take the time to do your own research. If you choose a budgeting method that reflects your money personality and suits your financial situation and lifestyle, you may just be more likely to stick with it.

Do you follow a budget? If so, what method works for you? Let us know by connecting with us on Twitter and Facebook using the Financial Literacy Month hashtag #FLM2019.

Jasmin Calyniuk Senior Vice President, LIT

Jasmin is a Senior Vice President with BDO and works out of the Saskatoon office. Jasmin received a Bachelor of Arts in Spanish, a Bachelor of Commerce in Accounting and a Masters of Professional Accounting from the University of Saskatchewan.

She is a Chartered Professional Accountant, a Licensed Insolvency Trustee and a Chartered Insolvency and Restructuring Professional