Family finances can be tough. A recent study found that almost 50 percent of Canadians are living paycheque to paycheque. Another study found that 57 percent of Canadians reported difficulties feeding their family. Having trouble paying the bills on time is stressful but worrying that your family is not getting the food they need is devastating.
If you are currently living from one paycheque to the next, you’re essentially living on borrowed time. Eventually, an emergency will arise and your careful stretching from one payday to the next will be disrupted. Living this way is draining, but you do have a choice. A budget might sound punitive or even more stressful, but it really isn’t. A good budget is just a tool to control your money – and to stop letting it control you.
Tally your income.
If you get paid once or twice per month with steady paycheques, tallying up your income is simple. If you get paid weekly or have multiple sources of income, like tips, paycheques, side jobs for cash, or more, your first step is to figure out how much money you make every month.
If you have a variable income, it’s worthwhile to go back and look at how much money you made in the past few months to see if the money coming in is consistent. If it varies by quite a bit, consider building your budget off the lowest month’s income and stashing the extra every month for emergencies or irregular purchases like holiday gifts or annual fees.
Establish your essential expenses.
What is essential in your life? Housing, food, and utilities are at the top of life for most. You may also need internet access if you work from home and gas money or funds for transportation if you commute to work.
While everything in your life now may feel essential, really work through your expenses carefully. An expensive car payment may not be essential if you can just take the bus or public transportation to work. A premium cable and internet combination may not be essential either if you can pay for just the internet and save hundreds without cable.
Go through each expense and determine if it is essential or just something you enjoy having. Once you’ve done this, tally up your expenses and compare them to your income. This is the start of your budget.
Build your basic budget.
Look at your income and look at your essential expenses. If the expenses are higher than the income, you will need to make some major changes in your lifestyle to be sure you and your family are safe and fed every month and that you’re able to work.
If you have money left over after your essentials, it’s time to sort out how to best divide that money among all the things that you still enjoy or feel obligated to.
- Debt payments – If you have credit cards or other loans, the payments on those loans are not technically essential, but your life (or at least your FICO score) can get uncomfortable if you fail to make at least the minimum payments.
- Entertainment – It’s hard to live without any source of entertainment in your home. Fortunately, streaming services can cost as little as $10-$15 per month, giving you some options for shows. Just remember that you don’t need to subscribe to every service to have something to watch.
- Clothing – Some clothing is essential, but it’s easy to spend a lot of money on a new outfit periodically and throw off the budget. If clothing is something you know you’ll be buying, give yourself a bit of money to spend on it and track that spending to avoid being wiped out by a shopping spree.
- Dining and Social – Social lives can be expensive, especially when there is pressure to spend money on drinks or dinners out with friends. Really look hard at how much you can afford to spend on fun in bars and restaurants and work that number into the budget.
Look for areas to cut expenses.
It’s very likely you’ll run out of money in your budget before you run out of things you’d like to buy. When that happens, it’s time to make some adjustments. You can cut expenses in a lot of ways without feeling like you’re making tremendous sacrifices.
- Consolidate debts – If you have many smaller credit cards, consolidate them into a single payment by applying for an installment loan and then making those new, smaller monthly payments.
- Trade-in a car – An expensive new car can cripple the budget. Consider trading in that car or selling it and buying a much less expensive used car that will get you where you need to go and save money at the same time.
- Move – If your rent payment is pushing hard at the budget, consider moving. Moving just fifteen minutes farther away from work can reduce costs considerably in some areas.
- Host friends and family – Buying some groceries and having friends over to watch the big game can cost considerably less than meeting them at a sports bar where you’ll pay for drinks and meals and tips. You don’t have to sacrifice your friends just to keep a budget.
Make it easy to keep it up.
If you struggle to keep tabs on your money, use technology to help. Streamline your spending by keeping a single credit card or just using your debit card. Use apps to help you track your spending across your new categories. A good app will help you see when you’re reaching your determined limit with your purchases so that you can lean back a bit and save that next purchase for the following month when your budget refreshes again.