In this special episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard…
Is it possible to find a budget that’s truly perfect for you? Budgeting is something many Canadians want to try, but they aren’t sure where to start. It’s true that every person’s budget will look different, and there’s not really one method that fits everyone. However, there are some steps everyone can follow to help find the perfect budget. Having a budget is good practice for maintaining your financial well-being. Plus, as we get closer to the holiday season, it might become more important for some to ensure they have a good budget in place to avoid overspending.
Here are five tips everyone can try to help them create a successful budget to improve their finances.
#1 Establish your goals
The first thing you should figure out is what exactly you want to budget for. Are you saving for a home? Do you plan on making a big purchase? Planning a trip? Do you need to pay off debt, or are you looking for ways to maintain your current lifestyle? There are many reasons to budget, and all of them are valid, but your goals will impact how you go about getting started. Budgeting for a home on a certain income will look different from budgeting for a home on another income. Figure out what it is you need to save for and what a perfect budget looks like for you. Use that knowledge, and your income, to set a realistic goal for how much you want to save and in what period of time.
A word of advice: Don’t set yourself up for failure by creating unrealistic goals. For example, trying to cut your spending by 90 per cent and double your savings in one month won’t work. You need to leave room for some trial and error, and for unexpected expenses. Give yourself time to achieve your goals!
#2 Decide how you will save
If you’ve decided you need to start saving more money, you now need to make another decision. Are you going to change how much money you make, or how much you spend? Of course, the route you take will depend on your situation. It’s often easier to try spending less first, rather than trying to find a new source of income to create a perfect budget. Cutting out excessive non-essential spending, and even making a conscious effort to use less electricity or water to lower your bills, can help you save money. However, if you have the opportunity to make more money, through another job or a passive income stream, this could be an option as well.
#3 Pay yourself first
Often, we think we should take care of things like bills or groceries with our money before we think about saving for ourselves. While we can’t neglect those payments, you can also try the pay yourself first method. When you get paid, take a small amount of money and put it into a savings account. This ensures you’ll have some money left over for yourself each month and you won’t spend it all, because you don’t want to end up in a spot where you have no money for anything but the bare essentials. If your income isn’t big enough to contribute much, start small with anything you think you can realistically add. Don’t stress over it — just add what you can!
#4 Set aside an emergency fund
Every perfect budget should include a rainy day fund. It’s important not to make your budget too tight and forget to account for possible emergencies that might occur. Even if you have a good job with a stable income, it’s smart to have a safety net in case of a sudden loss of money. It can be stressful to not know whether you can afford a certain unexpected expense that you really need, such as a vet bill or dentist visit. You might also need backup money for pricey home repairs like leaks, mold issues, or heating problems. Put some money into an emergency fund each month so you know you have something to fall back on. We never see emergencies coming, so do your best to prepare for the unexpected!
#5 Check in regularly
You’ll never know what kind of progress you’re making if you don’t check in. Even though it can be intimidating, it’s important to check your bank accounts and your savings often. You should get in the habit of checking in once a day to see how much you’re spending, and whether you need to make any adjustments. This is the fastest way to know if you need to change anything, rather than hoping for the best and trying to save and spend blindly. The convenience of tapping your debit or credit card can often get out of hand, and many small purchases can add up quickly. Seeing those concrete numbers will give you a sense of how to move forward.
Creating a perfect budget is a lot of work, and it might take some trial and error before you find the solution that works for you. Budgeting, when done properly, can help you save up for whatever your goals are. Plus, if you need some guidance, that’s where we come in!
If you have questions about your budget or buying a home, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.