Creating a budget
Let’s talk setting a budget. This is probably one of the most important steps to make sure you’re getting ahead financially, mostly by making sure the money going out isn’t greater than the money coming in.
What is your actual monthly income?
Although we usually get paid in the middle and at the end of each month, I find working with a monthly base easier as a lot of payments are monthly. The actual monthly income will be what is taken home after tax and all other deductions from your company.
What are your needs?
Needs are what you must pay each month. These include payments like rent, insurance, bills, groceries, etc.
Make sure to set some aside for savings
Set aside some money each month into a savings account. This can help in the future if any unexpected expenses come up.
How much is left over?
Now that the musts and savings have been determined, figure out how much you have left.
What are your wants?
What things are important to you? I love to travel so I set aside a percentage of each paycheque for this purpose. By setting aside money each month for things I really like to do, I won’t be going into debt to finance the fun things in life!
Let’s use some real numbers!
My monthly income was around $6,200.
My needs are:
- Rent, utilities and insurance: $1,800
- Phone bill: $100
- Internet bill: $75
- Vehicle Loan: $550
- Student Line of Credit: $150
I’ve decided to set aside 10% of each paycheque towards savings.
Other things I want to set aside money for include travel, clothing, sports/recreation and health. I also make sure to set aside money for overall spending which usually includes groceries and going out for meals.
When I create my budget, I prefer to work with percentages. My breakdown is below:
| Percentage | |
|---|---|
| 100% | |
| Housing | 34% |
| Vehicle | 10% |
| Student LOC | 3% |
| Savings | 10% |
| Clothing | 9% |
| Travel | 10% |
| Sports & Rec | 6% |
| Health | 8% |
| Spending | 10% |
I have set up my bank account that each time a paycheque comes in, this percentage amount is automatically transferred to their respective accounts. Yes, I’m one of those people with 6 savings accounts 😊.