By Jasmin Brown, BDO Debt Solutions

BDO Debt Solutions

How to Get Started on Creating a Budget

Feb 1, 2021 | 2:48 PM

One of the things I am always telling people is that they should create a household budget. No matter your income level, everyone should have a budget. A household budget is your most powerful money management tool. It can help you to develop a debt management plan and help you to achieve your financial goals. Many people realize that it is important, they just have some difficulty getting started. Here are some tips to get started on creating your household budget so that you can be in control of your financial situation.

Start with what you have coming in

Identify any sources of income that you have and the frequency with which you receive them. Many budgets are created on a monthly basis. However, if you receive your pay bi-weekly or seasonally, you can determine an average monthly amount, use the lower income months as the base budget amount, or adjust your budget to match your pay frequency.

Be honest about your expense numbers

Accurate information is going to lead to success. To get accurate numbers, start by looking at your last two or three months of bank and credit card statements. Write down what you spent by category. The more specific you can be the better.

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Don’t forget the small expenses

The small things, that may even seem like pocket change, can really add up quickly. These can be things like convenience store purchases, buying a daily coffee, in-app purchases, etc. These expenses should be given their own category.

Distinguish between fixed vs. variable expenses

Fixed expenses are those that are more or less the same month to month. These would be things like rent/mortgage, vehicle payments, internet, etc. Variable expenses are those that can change month to month. These would be things like food, entertainment, gas, etc.

Review and create

Once you have compiled the above information, you will have to tailor the amounts to ensure you are not overspending. Ensure you make room to reach your goals for savings or an emergency fund, and debt repayment. When looking at where you can adjust your expenses so that they do not exceed your income, usually it means adjusting your variable expense amounts.

Track as you go

Once you have your budget in place, it is important to track as you go to avoid overspending. Whether you use a budgeting app, a spreadsheet, or a notebook, regularly record what you have spent by category throughout the month. You want to review the budget and how your actual spending is tracking against your plan regularly. To stay on track, it may mean making some tough decisions. If you overspend in one category, it may mean going without in another.

The budgeting process is not always easy. Try to focus on progress instead of perfection. If you stick with it, budgeting will get easier over time, and will help give you control of your financial situation. For additional information and tools to assist you with budgeting, visit our website https://debtsolutions.bdo.ca/debt-help/budgeting-advice/

If you are having trouble making ends meet each month, finding the right debt solution can help. Call 1 855 BDO DEBT to book a free, no obligation consultation with a BDO debt professional.

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