Simple Household Budgeting Strategies
This November marks Canada’s first Financial Literacy Month – a full month of activities and events highlighting the need for increased financial literacy in Canada, and drawing attention to the programs, services and tools that help Canadians make the best financial choices.
Financial literacy means having the knowledge, skills and confidence to make responsible financial decisions. One of the simplest tools for gaining knowledge of and confidence in your financial situation is learning to set and follow a budget.
The thought of having to stick to a budget might make you cringe. It sounds restrictive and boring. But if you are serious about creating wealth, a budget can actually give you freedom. A budget helps you gain control over your finances, know where your money is going, and have a plan to reach your financial goals.
Here are some easy household budgeting strategies you can use to get started.
Find out how much you earn.
The way you’re paid can determine how you budget your money each month. If you’re paid on a weekly basis, you can calculate your budget based on four paychecks a month. That means you’ll have four extra checks throughout the year to help with extra expenses.
If you’re paid bi-weekly, you can calculate your budget based on two paychecks a month, and have two extra checks throughout the year.
If you’re paid monthly or semi-mpnthly, calculate your budget based on the monthly amount. You won’t have extra checks throughout the year, so you’ll need to be careful in budgeting for the extras.
For the self-employed, commission earners or others who aren’t paid regularly, figure out your annual income and divide it by 12 to help determine your monthly income, and be sure to put money aside in moths when you bring in more money, to cover you off during times when money is scarce.
Track your expenses.
Your fixed expenses, the items that stay the same from month to month, will be easy to figure out: your mortgage or rent, car payment, cable nad internet, and etc. Other expenses can be trickier to calculate. To find out how much you really spend in a month, carry a notebook with you and write down everything you spend for the next 30 days. This will tell you how much money you’re spending, and where it is all going.
Figure out the difference.
Now, find out the difference between what you spend and what you earn each month. If you have a surplus, a portion of that should be budgeted for investments or savings. If you have a shortage, you have one of two choices to solve your budget woes: lower your expenses or increase your income. You may even want to do both.
Lower your expenses.
Lowering your expenses is the most obvious way to solve a discrepancy between your income and your spending. Simple changes made over time, such as renting a video instead of going to the movie theatre, packing a lunch rather than eating out, or making coffee at home instead of buying on the way to work can add up to big dollars in your bank account. Others may be lifestyle changes, such as giving up one car and taking public transportation instead.
Taking control of your finances by setting up a household budget is an important first step to creating wealth. As you begin to make wise decisions about where your money goes, over time you will find opportunities to spend less and have more money to invest for your futire needs.
For more budgeting tips, see this list of tools and resources posted by ABC Life Literacy, a member of the Financial Literacy Action Group.
http://abclifeliteracy.ca/financial-literacy-tips-and-resources
This November marks Canada’s first Financial Literacy Month - a full month of activities and events highlighting the need for increased financial literacy in Canada, and drawing attention to the programs, services and tools that help Canadians make the best financial choices.
Financial literacy means having the knowledge, skills and confidence to make responsible financial decisions. One of the simplest tools for gaining knowledge of and confidence in your financial situation is learning to set and follow a budget.
The thought of having to stick to a budget might make you cringe. It sounds restrictive, challenging, even boring. But if you are serious about creating wealth, a budget can actually give you freedom. A budget helps you gain control over your finances, know where your money is going, and have a plan to reach your financial goals.
Here are some easy household budgeting strategies you can use to get started.
1. Find out how much you earn.
How much money do you (and your spuse or partner) bring in every month? This might include salaries, rental income, investment income, child support and any other source of funds.
It is important to consider that the way you’re paid can determine how you budget your money each month. If you’re paid monthly or semi-monthly, calculate your budget based on the monthly amount.
If you’re paid on a weekly basis, you will want to calculate your budget based on four paycheques a month. This means you’ll have four extra pay periods throughout the year to help with extra expenses, or contribute a little extra to savings or investments.
Similarly, If you are paid bi-weekly, calculate your budget based on two paychecks a month, and have two extra paycheques throughout the year.
For the self-employed, commission earners or others who aren’t paid regularly, estimate your annual income and divide it by 12 to help determine your monthly income. Keep in mind that some months you might earn more, some less. Be sure to put money aside in moths when you earn extra, to cover you off during times when money is scarce.
2. Track your expenses.
Your fixed expenses, the items that stay the same from month to month, will be easy to figure out: your mortgage or rent, car payment, cable nad internet, and etc. Other expenses can be trickier to calculate. To find out how much you really spend in a month, carry a notebook with you and write down everything you spend for the next 30 days. This will tell you how much money you’re spending, and where it is all going.
3. Figure out the difference.
Now, find out the difference between what you spend and what you earn each month. If you have a surplus, a portion of that should be budgeted and set aside for investments or savings. If you have a shortage, you have one of two choices to solve your budget woes: lower your expenses or increase your income. You may even want to do both.
Lowering your expenses is the most obvious way bring your spending below the value of your income. Simple changes made over time, such as renting a video instead of going to the movie theatre, packing a lunch rather than eating out, or making coffee at home instead of buying on the way to work can add up to big dollars in your bank account. Others may be lifestyle changes, such as giving up one car and taking public transportation instead.
Taking control of your finances by setting up a household budget is an important first step to creating wealth. As you begin to make wise decisions about where your money goes, over time you will find opportunities to spend less and have more money to invest for your futire needs.
For more budgeting tips, see this list of tools and resources posted by ABC Life Literacy, a member of the Financial Literacy Action Group.
