Most clients receiving help at Community Financial Counselling Services fill out a cost-of-living form, a detailed list of their monthly spending. It's often only after filling out the list they realize just how much they actually spend every month. It's also a good guide for what expenses a realistic budget should include.
Housing: Mortgage, rent, taxes, maintenance, utilities, insurance, phone, cable, Internet and parking
Food: Groceries, daily purchases (i.e.: milk or other perishables), dinner, coffee and lunches out
Apparel: Clothes, shoes, laundry, dry cleaning
Transportation: Car loan or lease, bus, gas, licence, parking, Autopac, taxi, maintenance
Child care: Daycare, child support
Insurance: Life, disability and other insurance premiums
Education: Tuition, supplies, RESP contributions
Health: Dental, medical, prescriptions, vision care
Entertainment: Concerts, movies, plays, hobbies, club memberships, lessons, lotteries, vacations, babysitter
Personal: Haircuts, esthetics, allowances, toiletries, household cleaning supplies, cigarettes, alcohol
Gifts: Birthdays, seasonal
Miscellaneous: Pets, donations, magazines, books, newspaper, bank charges
Savings: RRSP and TFSA contributions, emergency fund
Sticking to a budget isn't easy, but here are a few helpful pointers to keep you on track:
Plan for the unexpected: Emergencies can sink the best-laid plans if your budget doesn't provide for additional funds for the unexpected. And putting it on plastic or the line of credit is not a contingency plan, says financial counsellor Sally Massey-Wiebe. Set money aside each paycheque for emergencies.
Estimate expenses, then verify: Write down what you think are your monthly expenses and then track your spending for the next month. Only by following your spending habits as closely as possible can you get a true feel for where your money is going, she says.
Paper, no plastic: If overspending is a problem, try using cash instead of plastic. With credit cards and debit, it's often easy to lose sight of your spending during the month. In contrast, you can only spend the cash you have in your wallet. Massey-Wiebe often recommends her clients use an envelope system, where they figure out their expenses for each pay period and put just enough cash for each expense in marked, separate envelopes. "You spend your grocery money from your grocery envelope and the gas for the cars from the gas for the cars envelope," she says. If you decide to spend the grocery money on beer, you have to at least make a conscious choice to dip into the envelope for food. "It reframes your spending choices when you start seeing all of the decisions that you make when it comes to spending as part of the big picture -- how it will affect the entire month."
Get everyone involved
Creating a budget for a household won't work if there's just one party involved in deciding the spending for everyone in the home. "If there are two people that are contributing to the income and the spending in the household, then often they have two different perspectives on what they spend as well as one another spends," she says. "Bringing that information to the table together is really very helpful."
Get good credit habits
Credit should be your friend, but it can also be your worst enemy if you don't use it responsibly. And a good budget will help you figure out whether you're able to afford to use it. "It's the 'what's left over' that is not already allocated to something that you can use for credit," she says. "You can make payments of that certain amount without jeopardizing something else."