Budgeting Guidelines to Create a Home Budget

Adamson & Associates, Inc.
5 min readJul 8, 2024

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We all know that we should have a budget that tracks down our monthly expenses but when it comes to creating a budget, how can you create one that works with your income and expenses?

A budget is there to help you plan and assign each dollar of your income to something you need or want. That includes rent, a mortgage, savings or fun. There are several ways to create a budget so let’s look at some budgeting guidelines to help you create a home budget that’s easy to stick to and doesn’t make you feel deprived.

Start With Understanding Your Income And Expenses

When you create your budget, you need to start with your after-tax income. So that means what you take home after paying federal and income plus your Canadian Pension Plan (CPP) and Employment Insurance (EI) contributions before any deductions.

The best way to get your monthly after-tax income is to look at your payslips or your chequing account if you do direct deposit.

Remember to include any earnings from freelance work or side-hustles minus the taxes and regular business expenses.

Next, figure out your expenses for your budget categories. This includes your needs and wants.

Needs would be:

  • Rent, mortgage payments
  • Hydro, phone, internet, groceries, transportation
  • Loans (car, school, etc.), credit card minimum payments, childcare and alimony
  • Savings and retirement like RRSPs, RESPs if you have children and TFSAs

Then there are your wants. These can be difficult to define but the rule is, are they absolutely necessary to survive? If not, they’re probably a want versus a need.

  • Entertainment, restaurants and takeout
  • Clothing, travel, gifts
  • Subscriptions to streaming services, food boxes, gym, magazines, laser hair removal, etc.

Then there are the yearly items like birthdays, travel, special assessments, etc.

Look through three to six months of your spending to get an accurate picture. That’s because you may have one or two big expenses a year like a car repair or emergency dental work. Remember to account for every dollar earned and spent.

Add up your spending and compare it to your income. If your spending is below your income, great! You’re spending less than you earn. If you’re spending more than you earn, a budget can help you see where you need to cut back.

Ways of Creating a Home Budget

There’s no need to make a brand new budget template because there are so many budgeting tools out there. That makes it super easy to plug in your income and your expenses.

Filing out your budget

The Financial Consumer Agency of Canada has one, the Ontario Securities Commission’s Get Smarter About Money has several budget planners, or you can use Excel because the formula lets you make an extremely customizable budget that captures all your spending categories.

With a budget template, you can plug in your income and your expenses and find out if you’re living within or beyond your means.

From there, you can adjust your living expenses. Areas to focus on include the variable costs like ordering food via delivery apps or going out to restaurants. From there, you can see where you want to cut back on spending.

Keep track of your monthly spending so that it becomes easier to correctly allocate the right amount to each category.

Using the 50/30/20 method

You may have heard of the 50/30/20 rule when it comes to budgeting. While it’s not a budgeting tool, it’s a good way to start allocating your money to different needs.

Using this method, 50% of your after-tax income goes towards the necessities like rent, mortgage, food and utilities, 30% goes to needs like vacation, entertainment and hobbies and the final 20% goes towards savings and retirement.

This method is an overview and you may have to adjust the percentages based on your expenses. For example, depending on where you live, your necessities may be 55–65% due to high rent.

The reason why the 50/30/20 method works is that it’s an easy way to start visualizing your expenses and build your budget.

Other Budget Methods

The 50/30/20 method isn’t the only one out there. Springing from it is the 80/20 method, touted for people who hate budgeting. The first 20% of your after-tax income goes towards savings, retirement and investments and the remaining is for you to spend however you want.

The other method is the 70/20/10 breakdown where 70% is for needs and wants, 20% is for savings and 10% is for debt repayment.

Neither of these is an exact method because you’re not budgeting the 70–80% and that could lead to overspending in certain areas. What they do is ease someone who has never budgeted before into the process. It doesn’t feel as restrictive which is a major reason why budgets fail.

How to Stick to Your Budget

Creating a home budget is the first part, the second is sticking to it. It can be difficult so here’s how you can create a budget that works for you.

Don’t Make It Too Restrictive

A budget that doesn’t have a little fun built into it will feel like a punishment and you may resent it and fall off your budget. So budget for a meal out or your favourite shows.

Give It Time

A budget doesn’t shine in the first month. It can take several months of understanding your spending pattern and reallocating your money before you create an ideal budget.

Be Honest With Your Spending

Account for every dollar you bring in and spend. We’re all great with the big expenses like the monthly phone bill but what about the smaller ones like coffee or a bagel? Track everything to get a true view of your monthly expenses and budget categories.

Automate Everything

Bill payments and savings can be automated so you don’t have to think about them, which can make budgeting easier.

The Benefits of Budgeting

No matter how you create and track your budget, keep your end goal in mind — living within your means, saving, understanding how you spend your money and adjusting your budget as your earnings or life changes. But the best benefit of budgeting is the sense of control you’ll have over your finances. Priceless.

If you are struggling to make ends meet and need help, reach out. Adamson & Associates dedicated team of qualified staff have decades of experience and are ready to help you through these difficult times. The earlier you contact an LIT for help, the better.

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Adamson & Associates, Inc.

Licensed Insolvency Trustee. Experts in bankruptcy, consumer proposals, credit counselling, and other debt solutions in Ontario. adamsontrustee.com