With inflated prices of everyday goods and services dominating the lives of Canadians, many are left wondering if they’ll ever be able to afford a vacation, save up for their first home, or meet the rising costs of day-to-day living. If you are feeling the financial pinch yourself, you might be thinking, how can you effectively manage your cash flow while also ensuring you’ll be able to achieve your future financial goals? That’s where a budget comes in. A budget is an optimal tool to help you tighten up your finances and set yourself up for financial success.
Whether you’ve already created a budget or are just getting started, it’s always beneficial to sit down and revisit these numbers every few months to make sure they reflect your current financial situation. By creating a budget that outlines your present monthly income and expenses, you will get a holistic picture of where your money is going instead of where it went.
Below are some tips on how to budget like a boss and take control of your finances:
1. Track your spending
A budget is all well and good, but are you actually sticking to it? And is it truly reflective of today’s cost of living? While it might be hard to keep track of every miscellaneous purchase, these transactions – like your daily coffee – can add up over time. Here are a few ways you can audit your spending each month:
- Save your receipts, or review your monthly bank and credit card statements, categorize the transactions based on the type of expense, and input them into a spreadsheet;
- Track your daily purchases in real-time into a spreadsheet or notebook; or
- Download an app that tracks and categorizes your (non-cash) transactions.
By observing your overall spending habits, you’ll get an accurate picture of your day- to-day expenses, identify frivolous expenditures – such as wants vs. needs – that can be curbed, and put more money back in your pockets.
2. Set your financial goals
Whether you want to pay off an outstanding loan within a year or are saving for an upcoming wedding or summer trip, having a budget will help you determine how much money you will need to save each month to achieve your financial goals.
Start by writing down the short and long-term goals that matter to you and your timeline to accomplish each of them. By setting attainable financial goals and writing them down, you will have a clear vision of how much you need to save, which can help you make smarter spending choices.
No matter the goal – big or small – referring to this list of goals regularly, and tracking your progress towards them, will help you stay motivated in your savings efforts and prevent you from spending your hard-earned cash on items that aren’t profoundly important to you.
3. Pay yourself first
Once you have determined your expenses and your financial goals, how much is left over? Spend these extra dollars on the most important person – you, and your future! Paying yourself first is where you put a set amount of money into your savings account as soon as you receive your paycheque and before you pay your bills or anyone else. Whether it is $25 or $100 every month, allocating a portion of your paycheque towards your personal monthly savings can help you develop healthy savings habits that will have your future self thanking you. Plus, by paying yourself first instead of last, you make your savings a financial priority, which can help you grow your savings into a balance you can be proud of.
Need help staying on top of your monthly savings contributions? Consider setting up automatic transfers to your savings account to help you stay on track and to protect yourself from accidental splurges.
Jessica Kelly Assistant Branch Manager of Bayview Credit Union recommends “starting as early as possible and setting up automatic payments to your RRSP or TFSA to pay yourself first. Increase this payment whenever possible if your income stream and budget allow, sit back and let it grow behind the scenes.”
Simply put, paying yourself first is a boss move.
Level-up your budgeting game with the help of a credit union
Managing your finances can feel complex, but it doesn’t have to be. If you are unsure where to start, visit your local credit union and speak to a financial advisor to create a financial plan that will help you tame your expenses, achieve your goals, and feel good about your financial situation. Find your nearest credit union, here.