5 Simple Steps to organize your budget

HAVE YOU EVER WONDERED WHERE your money goes? You wouldn’t have to if you had a
budget. Instead, you’d know exactly how you’ve been spending your cash. A budget is an
essential element of financial planning. It’s a great tool not only for monitoring finances, but
also for getting them under control. The financial rewards of budgeting are great—including
growing wealth as you commit more money to saving and investing.

To organize your budget, use your computer’s personal finance software, a spreadsheet
program, or draw columns on the pages of a notebook. Start with the following steps.
1. Calculate your income.
List all income sources, including salary, commission, bonuses, pension payments, money
from investments, alimony and child support. For a household budget, it’s best to deal with
after-tax amounts.

2. List expenses.
Itemize your monthly expenses. You may have already entered and categorized spending using
your financial software. If not, consult your banking statements, chequebooks, credit card
statements and other financial records. Expenses vary, so take an average over three or four
months. Also keep in mind payments you make once per year, such as car insurance or
property taxes, and average these out for each month.

List all expenses, right down to your daily workplace coffee. Applicable items include mortgage
payments, rent, utilities, loan payments, parking fees, public transportation, private health
insurance, dry cleaning, gifts, vacation costs, donations, lunches and entertainment. You
should also include money saved and invested, such as RRSP contributions.

3. Total and subtract.

Now total your income and expenses separately to see how much comes in each month, and
how much goes out. Then subtract expenses from your income to determine the amount left to
save and invest. This is an important number—it shows you how successfully you’ve been
managing your money. If the figure is small (or worse, has a minus sign in front of it), you’ve
clearly got some work ahead of you. A larger amount means you have more potential to take
charge of your financial future. Whatever the result, there’s generally room for improvement.

Use your budget to find ways to increase your savings and investments. How? Consider the
following:
4. Reducing expenses.
Your budget will help you identify expenses that can be cut, and assist in setting new spending
objectives. Think about how much you spend each month on the individual items in your
budget, and then decide how much you can realistically cut. Don’t go overboard—try cutting
back a little at a time. If your new goals are overly strict you’ll never stick to them.
5. Review your debt.
How can you pay it down faster? Is there a way to reduce overall interest costs, such as
consolidating existing loans?

Together, we can use this opportunity to manage your short-term investment plan. Once your
cost-cutting plan is in place, review your progress every few months. You might find further
opportunities for shaving expenses. And you’ll most certainly see that you have more money
left over to invest in your future.