Make a budget that works

The first step to getting ahead financially is setting a budget that works. That means setting a budget that reflects real life and doesn’t exist only on paper.

If you aren’t already working with a household budget, or if the idea of using a household budget feels a little too rigid for you, here are some tips on how to set a real-life budget that not only works- but helps you achieve your financial goals.

Set your goal

Speaking of goals, what are yours? Goals need to be front and centre before you even start allocating and slashing expenses. Make sure they are SMART goals.  Be specific (not “have more money”). For example here are some specific goals:  eliminate or reduce credit card debt by $1000 by the end of March; save $1500 for a holiday by the end of November; save up $10,000 this year to fund home renovations; save 10% of each paycheque for retirement.

Now that you know what you want to do, how are you going to get there? You’re going to set out a plan with steps helped along by your monthly budget.

Lay your cards on the table

Literally. You need to know what you owe vs. what you make. Gather all of your financials and lay the info out on the table.

Once you know what you are dealing with, develop a system to track your spending (every dollar). Some people favour the old fashioned pen n’ paper or more complex software, but a simple worksheet or excel spreadsheet will do the trick too.

Trial run

You may want to do a trial run the first month of your budget, just to make sure that it jives with what you’ve set out for yourself.

It also gives you a good, real-time opportunity to track your spending to understand where your money is going- so that you can determine where you can cut down.

Make a date

Budgets are meant to be tweaked in response to changes in your life. You rule the budget, not the other way around. Revisit your budget at least once a quarter to make sure that you are on track and that your targets make sense.

Remember savings

Even if it is a small amount, it is essential that your budget include savings. Every little bit counts! It’s about creating good financial habits which will set you up for success.