Good financial planning begins with a household budget. Creating a budget helps you understand where your money is going each month and also allows you to develop a plan for saving. It is important to have a budget so that, you can easily track your spending, keep, monitor, and reach your financial goals.

What is your income and money-in?

First, determine your money coming in.  Most of your household income will likely be coming from your employment.  Take a look at one of your pay stubs and see how much you get each month after taxes and payments for items like benefits, parking, donations, etc.  Don’t forget about other forms of income from other sources, such as stocks or a rental property, pension, Canada Child Benefit, etc.

What are your fixed expenses?

Once you know your monthly income, you should subtract your necessary fixed expenses from the total. These are expenses you have to pay each month and can’t change for the time being. This includes bills like your mortgage or rent, utilities, car payments, and insurance premiums. Remember that even items like groceries, while they need to be factored into your budget, are

What are your savings goals?

After you’ve subtracted your necessary expenses, you should set a target savings goal out of what’s left. This is money you’re going to put aside for long-term financial goals like saving for a down payment, emergency fund, educational expenses, a trip, and retirement savings. It’s important to put your savings aside as soon as you get each paycheck because otherwise, it’s very easy to spend everything and not have any money left over.  Once decided, set up an automatic debit from your chequing account.

How are you managing your debt?

There are good debts and bad debts.   Mortgages would be considered good debt, while credit card balances would be considered bad debt.   Credit cards and lines of credit should be a priority to pay out because they are usually at the highest interest rates.   If you are carrying balances, you must ask yourself why.   Chronic card balances could be a sign that you are living above your means and adjustments need to be made.

What are your variable expenses?

Variable expenses can sneak up on you.  In my experience, most people don’t seem to know how much they spend on food (both grocery and restaurant), nor do they know how much they are spending on subscriptions and small day-to-day purchases.   The best way to see what you’ve done is to pull out all of your monthly financial statements (Bank account, credit cards, and lines of credit).

Write it down.

Writing it down or creating a spreadsheet is an excellent exercise and it helps identify exactly where you may be overspending or undersaving.   We have a pretty decent budget worksheet that may help you which you can download below.

Once you have written down all of your income and expenses, you are going to have a surplus or a shortfall.   This is the moment when you may feel a little nauseous and realize that you either need to reallocate resources, spend less or earn more.  It’s really important at this stage to NOT PUNISH YOURSELF.   Budgeting is a lot like dieting and exercising, it’s very easy to make bad choices and fall off the wagon.   You have to think of this as a process that takes time and tweaks.   Knowledge is power.

Debt Reduction & Saving Increases

Once you have made some tweaks to your monthly spending habits, the next step is to address debt.   Improving your cash flow can increase your savings and help you manage your lifestyle.   It is important to reduce debt and debt payments by paying them off quickly or refinancing or consolidating.    If you aren’t in a position to consolidate or remortgage, you can try a debt hack called debt stacking.   This process gets you to focus on your smallest debt first to pay off.  Once paid off, you can then take that monthly payment and add it to your next smallest debt balance.   This will help you to focus and feel more accomplished.  It can also help improve your credit score.

Savings is also important.  Pay yourself first is the best rule of thumb.   A few years of not saving now could end up costing you $1000s if not tens of $1000s in the future.   Basic accounts one should consider are RRSP, TFSA, and High-Interest Savings accounts.

You can download our budget worksheet below!

Budget Worksheet – MAINSTREAM MORTGAGES – Download by clicking the link.

Top 10 Budgeting Tips

1. Get Mentally Prepped
   Budgeting can be challenging and emotional. You might uncover bad habits or feel embarrassed by your spending. That’s okay—self-forgiveness and a positive mindset are crucial to success.
2. Gather Your Financial Information
   Start by printing out one month of bank statements, credit card statements, line of credit details, and pay stubs. This gives you a full picture of your income and expenses.
3. Use a Budget Worksheet
   Download our budget worksheet or use a spreadsheet. Record all your income (use net income) and expenses into categories. For bi-weekly amounts, calculate the correct monthly amount:
   Monthly Amount = Bi-weekly Amount x 26 / 12.
4. Identify Surplus or Shortfall
   • If you have a surplus, celebrate! Allocate it toward savings or debt repayment.
   • If you have a shortfall, you’ll need to refinance existing debts, spend less, or earn more.
5. Refinance Debt with Caution
   Refinancing can improve cash flow, but it comes with increased interest costs and repayment time. Be mindful of addressing underlying overspending issues.
6. Cut Back on Expenses & Use Cash For Discretionary Spending
   Here are a few strategies:
   • Lower utility usage: Adjust your thermostat by a few degrees.
   • Reduce food waste: Monitor and plan groceries carefully.
   • Cancel unused subscriptions. (Netflix, Amazon Prime, Spotify, etc)
   • Review insurance: Compare providers to save on premiums.
   • Shop second-hand: Thrift stores and online marketplaces offer great deals.
   • Batch cooking: Cook in bulk, freeze meals, and save money.
7. Increase Your Income
   Consider these options:
   • Sell unused items online or host a garage sale.
   • Rent out a spare room.
   • Monetize hobbies or skills.
   • Explore better-paying job opportunities or side hustles.
8. Set SMART Goals
   Your financial goals should be:
   • Specific: “Save $5,000 for a trip to Puerto Vallarta.”
   • Measurable: Calculate how much to save monthly. $5,000/12= $600 per month)
   • Attainable: Ensure the timeline and amount are realistic and fit into your budget.
   • Reasonable: Use your budget worksheet to make sure there are not any deficits.
   • Time-specific: Set a clear deadline.
9. Involve Your Family
   Budgeting is a team effort. Get your family’s buy-in to create a shared understanding of financial goals and responsibilities.
10. Tackle Debt Strategically
    Use debt stacking: Pay off the smallest debt first, then apply that payment to the next debt in line. This creates a snowball effect that builds momentum and helps to pay debt faster.

For more tips please contact us