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This Padlet seeks to educate you on the importance of financial planning, and explores the roles that a financial "safety net", budgeting, and saving play when planning for your future. Just as it is important to plan for long-term goals, it is also important to be prepared and plan for the unexpected.

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1. What did you learn about the topic that most surprised you? 

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1. What did you learn about the topic that most surprised you? 

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Nothing about this topic took me by surprise, however I would say that it seemed that the most stressed point was looking at your spending habits and creating a budget based on those. It is important to look at your history of spending to determine what you need to adjust and how you can start changing your current spending habits to work toward your future goals.

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2. Provide a real-life example of how this topic is relevant or interesting for you? 

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2. Provide a real-life example of how this topic is relevant or interesting for you? 

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As I am graduating soon and looking toward getting my first full time permanent position, I find this topic extremely important. I believe that the information that I learned from my research will allow me to create a plan to begin my own financial planning process and will assist me with managing a more consistent income.

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3. If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on? 

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3. If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on? 

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I would pass on the importance of separating needs from wants, while also making sure you have the funds to support some wants every now and then. I believe that budgeting for your wants is very important for your mental health so as to not overwhelm yourself with guilt on the occasion that you do spend money on yourself.

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Website #1: How to Budget for Needs and Wants

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Website #1: How to Budget for Needs and Wants

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This website describes the differences between financial needs and wants and outlines how to budget for each when creating a financial plan. Financial needs are necessary expenses that occur each month/year that you must pay in order to live. These needs can include rent, groceries, gas, insurance, etc. Financial wants are expenses that are allocated toward having fun. These wants can include vacation expenses, routinely getting a drink from your favourite coffee shop before work, concerts, etc. These are things that you can live without and can cut back on if you are under financial stress. This website advises users on how to shop and budget for financial wants. Some of these tips include shopping for sale items, reducing the amount of times you get take-out, and shop for better insurance rates and mobile plans.

I chose this website because I feel that it clearly describes to its users how to separate financial needs from wants. Oftentimes, our wants can feel like needs, which can affect our finances in a negative way. I feel that this website stresses the importance of being honest with your spending and being truthful about which expenses are wants that you may falsely categorize as needs. Being honest with yourself when it comes to your spending habits is one of the most important things when creating your financial plan.

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Budgeting is one of the most important things you can do to prepare yourself for a successful financial future and to ensure you are making room for what is most essential to you. By budgeting for what you want and what you need, you're setting aside a certain amount of money for a particular purpose.

To understand exactly how to budget, you should answer two very important questions:

Your needs are your daily expenses and your short-term spending. Think groceries, gas, car payments, rent or mortage payments - the list goes on. These are the things you need to budget for, because if you don't - well, you can find yourself in some serious financial trouble.

Then there are your wants. These are often the fun things - the things and experiences you desire and want to budget for. For example, going out for dinner, going to a concert, or taking off for the weekend with some friends or loved ones.

Another factor, which is everyone's least favourite part - is the emergency fund. Setting aside some money for the things you hope never happen, but sometimes can happen, so it's never a bad idea.

By creating a budget that splits between your needs and wants, you're giving yourself the opportunity to see all your expenses and evaluate what you actually need, versus what you really want.

What exactly are my needs?

Understanding your needs is a big step in getting your budget to a good place. This makes sense, as everything that falls under this category accounts for most of your budget.

The part that requires the most discipline, is separating your needs, that in truth, are actually wants. For example, your Netflix account has a bill that you need to pay. So, it's a need... right?

Not so fast. If you only had $15 in your account and you had to choose between putting $15 worth of gas in your car (which you need for work) versus, $15 so you can binge on the latest series of Top Chef - you all of a sudden understand the difference.

Understanding these differences are crucial, especially when you have a tight budget.

Basically, if you can survive without certain things, they're not needs - they're wants.

Another thing to consider when you're figuring out your budget, is the type of bank account you'll need. If you're regularly using your debit card, making Interac e-transfer® transactions and withdrawing cash, a TD Unlimited Chequing Account may be right for you as it offers unlimited transactions ¹. Alternatively, TD also offers other types of chequing accounts that can help suit different needs. If you're still undecided, our Discovery Tool can help you decide which account is best suited for you.

All that being said, your needs can - and most likely will - change. Your career, your living arrangements and other events can cause these shifts. So, reviewing your budget from time-to-time may be a good idea, allowing you to re-allocate your money into other buckets, like savings, for example.

What exactly are my wants?

Identifying your needs is the responsible thing to do and should be your biggest priority.

Now comes the fun part: budgeting for your financial wants.

Let's not forget: your wants are very important too. Wants can help bring joy, comfort, and balance to your life. If you're working hard, you need to be able to reap the rewards of all those long hours - within reason, of course.

Some of your wants may include:

Travelling (including road trips)

Subscribing to streaming services

Eating at restaurants

However, just like needs, your wants can change too. Depending on where you're at in life - and where you're going, you may be swapping your sports out with kids sports and adding the Disney channel into your streaming package before you know it.

This is why it's a good idea to revisit your budget every once in a while, to ensure your money is being used properly.

How to budget for your needs and wants

Now that you've gone through your needs and wants, there may be some overlap.

For example, when renting an apartment - which is clearly a need, you may have to decide between a 600 and a 650 sq ft apartment. You may want the 650 sq ft one, but you only really need 600 sq ft. Or you want to buy something brand name versus off-brand. You may need a rain coat, but want the designer one - which could be a few hundred dollars extra. At the end of the day, it really comes down to what you can budget for.

This is why it's important to look at your needs and wants objectively and decide where each fit in and how it impacts your overall financial well-being.

A great piece of advice is to write out all your things and start putting them into their respective categories. When you start to track your spending, you may be surprised to learn that what you think is a need to have, is actually just a nice to have.

Some ways to find extra money in your budget from a needs perspective:

Shop for a better mobile plan

Shop for better insurance rates

Seek out sale items when shopping

The same goes from a wants perspective. Identify what your wants truly are and see if you can manage them more effectively. For example,

Eat out less often

Buy fewer clothes

The bottom line when budgeting for needs and wants

The bottom line is that you really need to look at your budget objectively. Be hard on your spending and be disciplined when it comes to truly defining your needs and wants.

The more honest you are with your spending, the harder your budget will work for you. If you start categorizing your needs that are actually wants - you'll be spending a lot of your budget on "needs" before you know it.

The whole point of creating a budget is to stick it - so you can help reach your financial goals, while also allowing yourself some flexibility.

If you're looking for a simple budgeting tip, tracking your spending on an Excel Spreadsheet is a great way to keep yourself accountable on a monthly basis.

You can also try TD MySpend, a helpful tool to track spending habits and to ensure your needs and wants are within your tracked budget.

¹ For more information about transactions and a complete list of account fees, click here for Account and Other Related Service Fees. For information on our general services, please view our General List of Services.

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Budgeting is one of the most important things you can do to prepare yourself for a successful financial future and to ensure you are making room for what is most essential to you. By budgeting for what you want and what you need, you're setting aside a certain amount of money for a particular purpose.

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Website #2: Your Financial Toolkit: Module 11 - Financial Planning

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Website #2: Your Financial Toolkit: Module 11 - Financial Planning

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This website communicates how to develop personal financial goals as well as how to plan for these goals through the use of an interactive module. The module educates its users on how to plan for specific life events, such as planning for education, getting into your first full time job, and retirement.  It is a great resource to learn about the basics when it comes to financial planning and it gives three questions to consider when beginning the planning process:

Where am I now?

Where do I want to go?

How do I get from here to there?

These questions are important to ask yourself as it helps you formulate both your short term and long term financial goals.

I chose this website because I feel that it is a valuable resource when you are beginning to plan out your finances. It places emphasis on new graduates and young professionals who are just getting into the start of their careers, which is a great time to begin financial planning if you have not already done so. This website gives users the opportunity to view an Action Plan at the end of the module to track progress and take next steps toward your individual financial plan as a road map toward your goals.

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Module 11: Financial planning - Canada.ca

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Understand how financial planning, estate planning and financial professionals can help you reach your goals.

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Website #3: How to Build an Emergency Fund

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Website #3: How to Build an Emergency Fund

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This website covers the basics about creating an emergency fund as a part of your financial plan. It describes example scenarios of when you may need an emergency fun to cover unexpected costs. These instances can include car repairs, loss of a job, accident or injury, or home and appliance repairs. These are expenses that you cannot predict having to pay for, so if you create an emergency fund, it relieves a lot of the financial stress that can come from these situations. The website goes on to describe four steps involved in creating an emergency fund for yourself.

This blog as a whole is a great resource for those seeking advice or coaching on how to manage finances and make your money work for you. Specifically, it is a great resource for women who are looking to find financial freedom and seeks to empower women and change the relationship that they have with their finances.

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Having a dedicated emergency fund provides you with financial security and flexibility to handle whatever life throws your way, including:
Not only is an emergency fund the key to creating financial security, but it also ensures you avoid the cycle of debt. Think about it - if an emergency popped up and you didn't have any savings how would you take care of that emergency? Most likely by using your credit card, line of credit or re-mortgaging your house. All ways to get further into DEBT! And we can't have that.
1. Calculate Your Emergency Amount
My personal rule of thumb is 6 to 12 months of your monthly income (because you never know what type of emergency can hit). Set a target date for when you want this achieved and calculate how much you would need to save each month to get there.

2. Open a Separate Savings Account
Your emergency fund must be saved in a separate, dedicated account. The money is meant to go in and ONLY come out in an emergency. When you co-mingle your emergency fund with money in other savings accounts, you run the risk of seeing a 'sexy balance' and believing you have the money for that vacation, those new pair of shoes and that fall coat. And before you know it, you have depleted the account with little to nothing left when an emergency hits.

Use an account that is easily accessible and have your money invested in more 'liquid' investments that are easy to sell. You also don't want to pay taxes when it's time to use the money, so make sure to take advantage of tax-exempt accounts like a Tax-Free Savings Account (Canada only).

3. Set Up an Automatic Savings Plan
You should never leave building your emergency fund to chance. Set up an automatic savings plan so that your money is automatically transferred into your emergency fund every month. This ensures the money is saved and not spent.

4. Funding It Faster
In addition to your monthly contribution, make a commitment to put any extra funds you receive into your emergency account (ie. bonus, tax refund, gifts, etc.). Also, take a look at your budget and see if there are any expenses that you can reduce or eliminate. Instead of spending this money, start saving it towards your emergency fund. If a recurring expense is about to end (ie. car loan payment), put this towards your emergency fund when it ends. And if you really want to super fund it, find ways to increase your income in the short term until you have reached your target.

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How to Build an Emergency Fund - Mint Worthy Co

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Having a dedicated emergency fund provides you with financial security and flexibility to handle whatever life throws your way, including: Not only is an emergency fund the key to creating financial security, but it also ensures you avoid the cycle of debt.

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This photo shows a common problem that with financial planning when you may not have the proper resources. Relying on outside sources for money is not a viable financial plan. You cannot guarantee that you will inherit money, win the lottery, or invent something amazing. Even if you have an idea, you still need funding to bring that idea to life! It is important to understand your short- and long-term goals and to make your current income and the money you have work for you to reach financial goals.

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This video reveals the basics of financial planning, the steps needed to create your financial plan, and the process of calculating your net worth. The video summarizes the importance of understanding your what your short and long term goals are so that you can create a financial plan best suited to your needs. Whether its saving for retirement, wanting to take a year off of work, or wanting to purchase a condo or property, a financial plan is what will guide you toward reaching those goals.

I chose this video because I appreciated how it brought up the topic of net worth. Oftentimes, we get lost in our debts and it is easy to forget about the small debts we have. It is important to keep track of debts and figure out what our net worth is, so that we can create a financial plan that focuses on paying off existing debt before we put money toward more expenses, or at least plan for paying off debt while we save for our goals.

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Transcript

Narrator: Do You Have a Financial Plan?

Financial planning is thinking about how to achieve your short-term and long-term goals. Let's talk about financial planning.

Unlike a budget that deals with cash flow, a financial plan looks at the big picture. It helps you set short-term and long-term financial goals and identify steps to achieving them. It's never too early to start planning for your future.

To help you on your path, we'll take a look at what a financial plan is, the difference between a financial plan and a budget, reasons why you should have a financial plan, and finally, the information you need to prepare your financial plan.

We will finish with an exercise to show you how to calculate your net worth. Your net worth is defined as your assets - that is, what you own - minus your liabilities - that is what you owe.
What is a FINANCIAL PLAN?*
Narrator: A financial plan is a roadmap to help you manage your finances over the long term so that you can reach your life goals.

Financial planning is not just about saving for retirement, although that is one good reason to have a financial plan. When working on your financial plan, you should ask yourself:

Where am I today? Where do I want to be? How do I get there?

Whether your goal is to get out of debt, buy a condo, take a year off work, or save for your retirement, your plan should always answer these questions.

Many of you may already have a budget. For those who don't, I encourage you to create a budget to help you manage your spending. It will also help you with your financial plan. A financial plan goes beyond a budget. It sets goals for your life and ways to work toward them. While a budget compares current income with expenses, a financial plan helps you think about future earnings, and what steps you need to take to reach your financial goals.

In short, a full financial plan includes the resources you have available, your debts, your earning potential, insurance, legal commitments, income taxes, pensions, and other factors.

Email conversation (on screen):

From: Mom & Dad

To: Sarah

Subject: Checking in

Hi Sarah! It's mom & dad from Florida! The weather is great and we're enjoying ourselves. How's the budgeting going? We miss you! Love Mom xox

From: Sarah

To: Mom & Dad

Subject: RE: Checking in

Hi Mom! Now that I've figured out how to do a budget, I'm preparing for my financial future! It's exciting! I'm glad you and Dad are enjoying retirement! Send some warm weather North. See you soon, Sarah
How can a Financial Plan HELP YOU?*
Narrator: You may be asking yourself how a financial plan can help you. Among other things, it can balance today's needs with your future goals, make the best use of your financial resources, manage your taxes and insurance, stay motivated and save for your needs, write a will, and plan for short-term and long-term goals. Remember that a financial plan is a living document, meaning it should be kept up to date. Once you create your plan, review it frequently. Your life or financial situation may change, which can have an impact on your goals and your overall financial plan.
Information needed to prepare a FINANCIAL PLAN*
Narrator: Preparing a financial plan is a matter of answering a series of questions. Some questions will require more effort to answer than others. Keep in mind that a well-thought-out financial plan will help you achieve what is important to you. The Financial Consumer Agency of Canada has created a simple template to help you prepare your financial plan.

It's available at their website.
ItPaysToKnow.gc.ca
For more complex financial plans, use the services of a certified financial planner. The simple financial plan template asks you several questions, such as: What do I want to do? What am I starting out with? Will I have enough money to get where I want to go?

Each question requires you to enter personal and financial information. Once completed, the template will help you calculate your net worth, identify your monthly income and expenses, and determine what is needed to reach your goals. If you don't have all the information you need when you create your financial plan, enter your best guess. Update your plan when you have more accurate information.

Email conversation (on screen):

From: Mom & Dad

To: Sarah

Subject: RE: Re: Checking in

Good for you Sarah! Your father and I are so proud of you. Set your goals high and reach for the stars, you can achieve anything you set your mind to! We miss you, Mom & Dad

From: Sarah

To: Mom & Dad

Subject: RE: Re: Re: Checking in

Thanks Mom! Preparing my financial plan is taking some work but I know it will pay off. It sure helped to set financial goals while I was in school. I am figuring out my net worth right now. Let's see if all those summer jobs paid off! I want to live the good life like you and Dad! Love Sarah
Calculating your NET WORTH*
Narrator: An important step in your financial plan is calculating your net worth. It helps you answer the question: What am I starting out with? As with your financial plan, you should update your net worth on a regular basis. There are three steps to calculate your net worth.

Step 1: List all your assets and their monetary value. This includes savings, investments, real estate, motor vehicles, and any other possessions that have a monetary value, such as art and collectibles. Add up the total value of your assets at current market prices.

Step 2: List all your debts and their values. Examples include credit card balances that you can't repay within a month, loans such as car loans, student loans, and balances on a line of credit, any mortgage balances, and any other debt, such as income taxes you haven't paid or money owed to family. Add up the total value of your debts.

Step 3: Calculate your net worth by subtracting your total debts from your total assets. I hope it is a positive number. If not, you have a negative net worth. This means your debts are more than your assets, and you should try to repay them as fast as you can.

Email conversation (on screen):

From: Sarah

To: Mom & Dad

Subject: I did it!

Mom! I did it! I finished my financial plan! I know exactly how much I need to make and save to reach my goals! It's exciting!! Maybe I'll come visit you and Dad in Florida! Miss you, Sarah

From: Mom & Dad

To: Sarah

Subject: RE: I did it!

Stay the course Sarah, and keep updating your plan! the sun is shining and we'd love to see you. Mom & Dad xox
What did we LEARN?*
Narrator: To summarize, we covered the basics of financial planning, including what is a financial plan and why it's important to have one.

We also discussed what information you need to create your financial plan, and how to calculate your net worth. It isn't always easy, but stay focused. You will feel rewarded every time you reach one of your life goals.

I wish you financial success.

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educational materials; personal finance; lifestyle; money management; financial planning

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Learn what a financial plan is, the reasons to have one and how to make your own.

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Video #2: Making a Budget in 5 Simple Steps

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Video #2: Making a Budget in 5 Simple Steps

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This video gives a short summary of how to make a budget. It gives 5 great tips to start creating a budget that works for you based on your spending habits and your savings goals. As with some of the websites listed in this Padlet, this video outlines the importance of prioritizing your needs over your wants, and cutting back on the "nice to have" expenses. These extra expenses add up significantly overtime and can contribute to your overspending!

I decided to choose this video because it advertises a great resource that TD bank has called the My Spend app. It is a tool that can be used to track your spending and categorize expenses into needs, wants, or other. It is a great tool to see where you spend most of your money and what you need to cut back on in order to be successful with your financial plans.

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5 steps to get you started on creating a budget

1. Do a monthly review of your income, expenses and investments.

To create a personal budget, it's a good idea to know the following: How much money you take home after paying taxes; how much your expenses cost; and how much money you contribute to savings and investments. When you keep a monthly tally of your income, expenses and investments, you can have a clearer snapshot of your financial picture. A tool like the TD Personal Cash Flow Calculator can help you crunch those numbers.

2. Understand your spending and saving habits.

There's likely going to be a percentage of your money you'll have to dedicate to necessary expenses (like a mortgage or student loans), another percentage for wants (like shopping or dining out) and a third portion solely for saving. Consider what percentage of your income you can put aside for savings each month and try to stick to it as best you can.

3. Set up expense guardrails.

If your goal is to save, it's a good idea to consider setting caps on how much you spend on non-essential items (like entertainment or dining out) so you don't accidentally spend more than you want to. You can also monitor any automated payment statements you may have so you're aware of any extra charges (like phone data overages) you may have incurred. You may want to use TD MySpend to help track any purchases made through your TD savings, chequing and/or credit card accounts.

4. Set your financial goals.

Do you have a financial goal in mind? The way you'd build a budget to save for a vacation might be different than if you're saving for a house. If you know what you're saving for, you can create a budget tailored towards that goal which can also help reduce the urge for impulse purchases. Having a financial finish line to aim for can also help you maintain your spending routine and encourage you to investigate more affordable spending options when necessary.

5. Track, monitor and adjust your budget as needed.

Think of budgeting as a marathon and not a sprint. To help you get the most out of your budget, you must play an active monitoring role and make adjustments as needed. For example, if you have a sudden unexpected expense, you'll likely have to readjust your budget or, if you have one, use your rainy day fund to handle those costs. Whether your financial goals are big or small, making a budget can help you track your progress towards reaching them.

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Making a budget: 5 simple steps - TD Canada Trust

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1. Do a monthly review of your income, expenses and investments. To create a personal budget, it's a good idea to know the following: How much money you take home after paying taxes; how much your expenses cost; and how much money you contribute to savings and investments.

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This video reveals the importance of building a financial safety net for unplanned expenses. It outlines how emergency savings funds should be separate from your regular savings to avoid spending that money and depleting your funds. Having a separate account for your emergency savings fund is importance as it ensures that you will have that money available to you in the event that you need to have unexpected car or house maintenance done, have to take time off of work, are injured and unable to work for a period of time, etc.

I chose this video because it talks about a different kind of emergency fund that you can create too that is often not thought of. In addition to putting money aside for emergencies, you can also slowly start to build up an emergency food fund. This allows you to use your emergency non-perishable food fund during times of unanticipated expenses. It allows you to use the money you allocate toward groceries toward emergency expenses instead. It is important to keep both types of emergency funds in mind when creating financial plans.

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This video talks about the importance of good saving habits when making financial goals and developing financial plans. More specifically, it talks about how you should strive to save at least 10% of your income in a separate savings account, either for short-term goals, long-term goals, or for an emergency savings fund. There are four steps that the video outlines to effectively save your money:
1. Build an emergency fund - save equivalent of 3 to 6 months of take home pay
2. Pay yourself first - consider savings as any other bill you would regularly pay
3. Automate your savings - automatically have your bank transfer money from your checking account into your savings account
4. Make your money grow - choose accounts that offer best interest rates that give you comfort

I chose this video because it not only touches on the importance of savings, but also talks about the importance of investing your money. This allows you to grow the money you have into a comfortable amount to use for savings. The video outlines the four major types of investments you can make:
1. Investments that pay interest (savings accounts, Canada savings bonds, and guaranteed investment certificates (GICs)
2. Shares in a company (stocks and mutual funds)
3. Property (real estate, precious metals, and art)
4. Direct investment in a business

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This graphic illustrates the steps in the financial planning process. It outlines what you need to think about when creating your plan, both short and long term, as well as the importance of formulating goals, budgeting, and creating an emergency fund as a part of that plan.

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Website #4: How to Make a Budget - The Ultimate Guide

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Website #4: How to Make a Budget - The Ultimate Guide

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This website discusses the budgeting side of creating your financial plan. As mentioned in other articles, this website talks about the important of creating short- and long-term goals for your future, so you can begin to plan for them. It also incorporates the importance of tracking your spending and reviewing past credit and debit card spend reports. Tracking your spending allows you to better understand your tendencies when making purchases, so that you can be honest with yourself and make the necessary changes in your spending habits to reach your financial goals.

It describes 5 stages for building a budget & staying within it:
Step 1 - Record Your Net Income
Step 2 - List All Your Expenses by Category
Step 3 - List All Debts & Minimum Payment
Step 4 - Include Your Money Saving Goals
Step 5 - Total Your Income & Expenses/Debt Servicing/Savings and Review

I chose this website because it talks about holding yourself accountable when budgeting. It suggests telling someone about your budgeting goals, using budgeting apps, and finding a budgeting style that works for your needs. This is an important thing to keep in mind when creating a budget for your financial plan as it is something that you must actively work on and allocate time toward.

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Making a budget can be one of the most fundamental money actions you take. A budget is a money blueprint and a financial plan to help direct your spending, saving, and debt repayment. But you don't have to feel overwhelmed in making a money management plan. Here is how to make a budget in 5 simple steps and what you can do before and after creating a money plan to ensure its success.

Why Budgeting Is Important

Making a budget can help you manage your money and feel more in control of your finances. It is not about depriving yourself, but rather about giving each dollar a purpose and living within your means, developing a sense of freedom with your money.

A well-thought plan can help guide your spending and track your income, expenses, debt, and savings.

Budgeting can also help with financial overwhelm and running out of money before your next paycheque.

By including sinking funds, you can better plan for major purchases avoiding having to go into debt.

And being aware of your spending can also help to reduce your costs. Just the act of creating a budget has shown to decrease spending.

Before You Make a Personal Budget Plan

Budgeting may be one of the most important financial moves you make. And it is an optimal first step. But there are some things you can do first to help you get prepared. Let's dig into what you need to know before you create a budget plan.

Know Your Goals

Having clearly written down short-term and long-term goals can help you financially plan for them. If something is important to you, then you will want to make sure it is a priority in your spending plan.

Before you make a budget, take some time to outline what your short-term and long-term goals are. If you have a partner, this can be a great exercise to do together. The goals you set can help shape your future budget.

Here are some financial goal examples for you to think about:

Short-term goals - saving for a downpayment on a home, saving for a holiday, paying down debt, buying a new car

Long-term goals - retirement, being mortgage-free, saving for college/university tuition

Track Your Spending & Monthly Expenses

If you want your budget to be successful, it's a good idea to start with realistic numbers and not just ballpark amounts or estimates. To get accurate numbers for your expenses, track your spending for a few months before creating a budget.

Tracking your spending can be done by keeping all of your receipts or monitoring your credit card bills and bank statements if you are a credit or debit card spender.

It's a good idea to track your spending for a few months because some expenses may not come up every month. And other costs may be variable, so monitoring for a few months helps you get a more accurate average to use.

Compile Your Paperwork

Once you've tracked, your expenses have all of that information handy when you sit down to create your budget. You will also want to have a record of your income (pay stubs can be good for this).

And because some expenses only happen once a year (property taxes, life insurance, annual membership dues, for example), get out a calendar for this step too. Go through each month and take note of when major or annual expenses come due. This information will be valuable later when creating your monthly money plan.

Why Do You Want a Budget?

And finally, before you create a budget, take some time to really think about why you want a budget. Having a solid reason for doing something can be very motivating. This motivation can help you stick to the budget when times get tough. And when it comes to money, there is a good chance that times will get tough at some point or another.

Here are some reasons why people create budgets:

Pay off debt faster

Save up for a major purchase

Take control of their finances

Don't want to wonder every month where their money went

Achieve their money goals

Get on the same page as their partner

How to Make a Budget

Creating a budget can be done in 5 steps. Here is your guide on how to make a budget.

Step 1 - Record Your Net Income

Whenever you are working with your budget, you want to use your net income. This is also known as your after-tax income or take-home pay.

Creating a monthly budget is the easiest way to start. Monthly paycheques make recording your net income easy every month.

Always use your base net income. Bonuses, raises, and commissions can be irregular, so have a plan for irregular income, but don't count on it every month.

If your paycheques are anything other than monthly, total up your annual net pay and divide it by 12 to get a monthly number. Or you can choose to budget per pay period (biweekly, bi-monthly, etc.).

The only tricky part of this step is irregular paycheques if you are a gig worker or freelancer, for example. If that is the case, try taking 3 months, or plan for the lowest months and adjust in the higher months.

Step 2 - List All Your Expenses by Category

Because you have already taken the time to track your monthly expenses and compile your annual expenses, this step can be pretty straightforward. For any of your yearly expenses, divide them by 12 for a monthly budget. When coming up with your category totals, think of them as spending limits.

There are 3 main ways that you can categorize your expenses:

Fixed vs. Variable

Fixed expenses are all of those that are known in advance and are consistent month to month. Examples of fixed expenses are rent/mortgage payments, vehicle payments, childcare, and monthly property tax payments.

Variable expenses are those expenses that vary month to month. You may know how much you spend in each category, but that amount can fluctuate month to month. Examples of variable expenses are food, entertainment, and clothing.

Needs vs. Wants

Needs are all baseline expenses required to live. Examples of needs may be rent/mortgage payment, transportation, childcare, and food.

Wants are all of the expenses beyond your basic needs. Some examples of wants may be transportation, clothing, and entertainment.

Needs and wants may differ from person to person. If you live near public transportation, you may not need a car, but if you live in an area with no public transit, then a vehicle may be a need.

Even though needs and wants can differ from person to person, be careful not to classify your wants as needs. Needs are the necessities.

Detailed Categories

Personally, I think that detailed categories are the best way to categorize your spending. Not only do detailed categories include your fixed and variable expenses and needs and wants, but they also provide a clearer picture of your spending.

Here are 20 budget categories you may want to consider in your budget:

Mortgage/Rent

Utilities

Cell Phone

Donations

Fuel (vehicles)

Car Insurance

Home/Tenant Insurance

Groceries

Eating Out

Entertainment

Pets

Public Transportation

Housekeeping

Annual Memberships

Travel

Sinking Funds

Fun Money

Bank Fees

Gifts

Vehicle Maintenance

Step 3 - List All Your Debts & Minimum Payments

Now that you have included your income and monthly expenses, it is time to include any debt repayment not been previously accounted for. If you have a credit card payment, student loans, or other loans, you will want to include their minimum payments in your money plan.

We always want to include the minimum payments for any debt as a necessity. Then any extra money you can allocate to paying off your debt faster if you so choose.

Step 4 - Include Your Money Saving Goals

Because you have already considered your long and short-term money goals, you should have an idea of how much you would like to allocate to savings every month. In this step, write that number down.

You may also choose to set aside money into various sinking funds if you have not done so in a previous step.

Step 5 - Total Your Income & Expenses/Debt Servicing/Savings and Review

In each previous step, you have come up with a list of numbers. Now it is time to see how they all add up together.

First, add up all your sources of net income from step 1. Then subtract all of your expenses from step 2, debt minimum payments from step 3, and savings from step 4.
What's your final number?
Suppose you have a positive number that means that your income is higher than all your expenses/debt/savings that is a good problem to have. You can choose to allocate any extra money to debt repayment or savings.

If your number is zero, congratulations, you have achieved a zero-based budget. Every dollar that you earn has a role. But a word of caution, sometimes when your first budget is that exact, there is little room for error.

And, if your number is negative, that means that you are spending more than you make every month. Look for areas to cut or negotiate. Remember having a budget is not about deprivation, so don't try to cut everything. But look for expenses that don't align with your values or expenses that you may be able to keep but negotiate a lower rate on.

Types of Budget Systems

Although the above 5 steps for how to create a budget are universal, there are many different types of budgets that you can consider. Each type has its positives and negatives, and it may take you a few months to play around with each type until you find one you want to stick with.

Here are a few different budget styles you may choose to look into:

And if technology is more your thing, you can create your own budget spreadsheet to keep track. The Government of Canada website has a great free online budget planner tool.

Or check out these budgeting apps that may help make your life a little bit easier. Some of these apps come with a monthly or annual fee, so make sure to read all the details before you sign up. Or check out this budget apps review for an honest opinion.

After You've Created a Budget Plan

Now that you've gone through making a budget, there are a few things that you can do to help ensure your success with your new money plan.

Monthly Review and Tweak

One of the most important things you can do with your newly created money plan is to review it monthly. Very rarely do we get our budgets 100% right on the first try. Your money plan is flexible and adaptable to your lifestyle.

Schedule time into your calendar every month to review your budget and spending. Keep track of the budgeted amount for every category and what you actually spent.

If you find that there is money left over every month, come up with a plan for what you would like to do with it. Spending it is okay sometimes, but you may also find it very rewarding to pay off debt faster or accelerate your savings.

When you do take the time to review your numbers, give yourself some grace. It may not be perfect for the first few months, and even later on, there may be months that you blow your budget. But go back to why you are budgeting, identify what went "wrong" that month, and make a plan to adjust in the future. One bad month doesn't mean you should stop budgeting.

How Will You Hold Yourself Accountable?

It's great to go through the exercise of making a budget, but how will you hold yourself accountable for it? Here are a few tips that may help:

Tell someone about your budget - whether it be a family member or friend, recruit someone to be your accountability partner.

Find a budget style that helps keep you accountable - the cash spending of an envelope budget system can really help with this.

Use a budget app - some apps can help keep you accountable, and they even find ways to help you save money.

Family Meetings

Scheduling a family meeting is a great way to get the whole family on board with a budget. Younger children do not always need to know all the details, but involving them can help to teach them about money as they grow up.

Your family meetings can be a place to discuss the general budget and how it aligns with your family's goals. Children may be more likely to buy into the plan if they understand what it is and how it may affect them.

Celebrate

If your budget has line items for debt payment, sinking funds, or your short and long-term goals, take some time to think about how you will celebrate the achievement of these milestones.

Celebrating your achievements doesn't have to cost a lot (you don't want to break your budget). But planning to celebrate can help keep you motivated along the way and is a critical step in enjoying your life. Remember, a budget isn't about deprivation. Give yourself the freedom to celebrate now and then.

10 Budgeting Tips

When it comes to budgeting, like anything else, we could all use a little help from time to time. Here are 10 budgeting tips to help you stick to your money plan.

Budget for fun money. Having fun money or cash category can provide a buffer in your budget. It can also help you feel guilt-free when spending money on yourself.

Automate your finances. The more you can automate your finances (bill payments, savings), the easier it will be to stick to your budget.

Separate each bank account. By keeping your chequing and savings accounts separate, you are less likely to spend your savings. You can even take it one step further and have your chequing and savings accounts at different banks. Bonus tip - automate the transfers to your savings account.

Only use your credit card if you have the money. Credit cards are not a source of income. Make sure you have the money in your account before using a credit card to make a purchase.

Don't be afraid to make changes. If your budget isn't working for you, you can change and update it. Comparing your budget numbers to your actual spending for the month can help you tweak your spending plan.

With the leftover money, prioritize saving. There will be some months when you have money left over at the end of the month. Make a plan for this money and try to avoid spending it mindlessly.

Always use your net income because taxes are a reality. Using your after-tax income will make your budget more realistic.

Use realistic numbers. Don't just estimate your spending. Track it and use real numbers when coming up with your budget category totals.

Look for simple moves with significant effects. Sure, coupons are great, but if you can save hundreds of dollars a month by not having a car payment or getting a roommate, you will see a more significant impact on the income side of the equation.

Update your budget when life changes. When life changes, so should your budget. Are you expecting a little one? Update your budget to reflect that. Just got a raise at work? Make a plan for the extra income.

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How to Make a Budget: The Ultimate Guide

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Making a budget can be one of the most fundamental money actions you take. A budget is a money blueprint and a financial plan to help direct your spending, saving, and debt repayment. But you don't have to feel overwhelmed in making a money management plan.