In order to properly manage your finances, establishing a monthly budget is essential. Indeed, making a detailed budget allows you to anticipate and better control your spending. It is an effective way to build your savings and to clearly envision the state of your finances in the mid and long term. You can tailor your monthly budget to various areas of focus such as a personal budget or a family budget.
Establishing a monthly budget is very important because it gives you a detailed view of the ensemble of your expenses and gives you a precise idea of the amount you need to survive on a weekly or monthly basis. A budget provides a clear picture of money coming in and money going out. It also helps you to identify the expenses that could be reduced, or even completely eliminated. In fact, the most important principle to keep in mind regarding a balanced budget is that the goal is simply to keep your expenses lower than your revenue. If your situation is otherwise, you must absolutely (and quickly) revise the manner in which you are managing your money.
To recapitulate, making a budget is the necessary precursor to painting an accurate picture of the state of your finances and to ensuring that you can provide for the future.
All told, establishing a monthly budget is not very complicated: it simply requires writing down your total revenue, and then subtracting your total expenses in order to arrive at the amount that is left over and available.
However, if you want to establish a realistic budget that allows for wise spending and a certain amount of investments, the task gets a little more challenging because savings absolutely must be planned for in the budget.
The first step is to list your sources of revenue. It is very important not to leave anything out if you want to arrive at a budget that reflects the reality of your financial situation.
The revenue column must therefore include all sources of regular income, such as:
In order to easily establish your monthly budget, you must divide your expenses into several categories. Start with the broadest categories and divide them further into subcategories related to your personal spending habits and lifestyle.
You could, for example, split your budget into three sections: living expenses, recreational expenses, and savings.
The biggest mistake when making a budget is forgetting to enter certain expenses that could, in the end, represent a substantial amount.
To establish an effective budget, be mindful of:
There exist numerous tools that can help you to calculate your monthly budget more easily. For example, the Canadian Government has created a budget-planning tool. It factors in your family circumstances, your age bracket, your housing situation, your employment status, and your budgetary goals. The budget planner can be adapted to your unique personal situation.
Kaleido has also put a similar tool at your disposal. It was created by our partner who specializes in family finances, and it can be of great help to you in planning your budget, as well as in managing your finances effectively and easily.
If you wish to ensure that your monthly budget is optimum, you can call on the help of a professional. The scope of your budget and of the number of expenses to consider can make the task of creating a budget more difficult than it might seem.
For this reason, consulting a financial advisor can ensure that you don’t leave out any details. Kaleido clients can benefit from the financial family coaching services provided by our qualified partners. They can get you off to a good start in managing your finances effectively and with peace of mind!