How to create a budget

To make the most out of today and tomorrow, you need to do three things:

1. Pay for housing/food
2. Save money
3. Have fun

And a good budget allows you to balance all three! It’s an essential tool for managing your personal finances, no matter how much money you have.

How do you create a good budget?

Creating a good budget requires a certain amount of discipline. But seeing where your money’s going can also be reassuring.

There are many ways to set up a good budget, but they all start the same way. The important thing is to include all the essentials.. 

Also, it’s important to set up a family budget that’s fair for everyone. If you’re looking for ways to manage your finances as a couple, we have some tips for you.

What goes into a budget? 

A budget includes basic living expenses:

• Housing
• Food
• Transportation
• Clothing

The housing portion of a budget includes:

• Rent/mortgage
• Electricity/heating
• Home insurance
• School and municipal taxes
• Condo fees

When it comes to budgeting for transportation, consider things like:

• Car payments
• Car insurance
• Repairs/maintenance
• Driver’s licence
• Parking
• Gas
• Transit pass, bike rentals and other transportation

A budget also includes other essential expenses, like:

• Groceries
• Clothing (basics)
• Cable/internet
• Cell phone/home phone
• School and childcare expenses

Pet expensesNotice anything? Your budget doesn’t include dining out, weekend trips, or leisure and hobbies. That doesn’t mean you have to give them all up. It just means that you pay for them after you’ve covered your basic living expenses.

What about budget tools?

A budget shows you the money going into and out of your pocket. There are some very handy tools that can help. The Government of Canada has a Budget Planner to create a personalized budget. 

How often do you review your budget?

1. Monthly or weekly/bi-weekly

Budgeting monthly is the common frequency to calculate expenses for things like your:

• Mortgage
• Car
• Insurance

For other expenses that aren’t paid monthly, like taxes, you can divide the total amount by 12.

If you’re self-employed, you might want to draw up a weekly or bi-weekly budget. Why? Because income and expenses can vary quite a bit. It’s more work, but you can see more clearly where your money needs to go.

2. When you have a major life event

It’s also a good idea to review your budget any time there’s a major change in your life. For example:

• Starting a new job
• Moving
• Birth of a child
• Change in financial circumstances

3. At the start of every year

Review your budget at the start of the year. Then you can adjust for any expenses that have gone up or down in the last twelve months.

How to budget and save money

1. Pay yourself first

In other words, save before spending. That way you can see how much you have left after your basic living expenses are covered. You can then divide the remaining money between your other needs and wants.

2. Save automatically

Set up an automatic withdrawal every payday. It’s a great way to save money in a registered retirement savings plan (RRSP), a tax-free savings account (TFSA) or an emergency fund. It’s also a good way to avoid those impulse purchases.

Once you have this set up, make sure to add it to your budget.

Remember: a budget is the foundation for any financial roadmap. In other words, it’s a great first step toward making your dreams come true!

Need help budgeting or saving?

A Prospr advisor can help you come up with a roadmap that starts with your budget. Then, they can work with you to create a savings strategy. Get started today!

This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.