Creating a budget
Creating a budget can help you understand your spending patterns, gain better control over your money and make sure that you have money when you need it.
What is a budget?
A budget is simply a detailed list of your expected income and planned spending for a week, a month or any period of time you prefer. This list is usually compiled by adding up your income and expenses to determine your typical income and spending patterns.
Why do you need one?
Creating a budget brings you many financial benefits:
- Understand how and where you spend your money
- Discover areas where you can potentially save money
- Be prepared for life’s challenges (loss of employment, car repairs, illness)
- Save for big purchases (a car, a vacation, returning to school)
- Feel more confident and in control of your finances
Getting started
Many people find the idea of creating a budget intimidating, but while it may take some time, it doesn’t have to be complicated.
Start by collecting the information you’ll need to work out how much money is coming in, how much is going out, and what types of expenses it’s going towards.
The types of documents you should have on hand include:
- Monthly bills for things like your cell phone, hydro, TV, rent, car insurance, gym membership, bus pass, etc.
- Bank statements that list purchases you make with your debit card
- Credit card statements that list purchases you make with credit
- Receipts for purchases you make with cash
- Pay stubs and other documents that list your income sources
Once you’ve collected these documents, you can start adding up your income and expenses for the month. You’ll find a step-by-step guide to this process here.