According to Statistics Canada, the average net savings for Canadian households was $852 in 2018. For the lowest income earners, consumption still exceeds income.
Unsurprisingly, debt and empty savings accounts are the norms for many Canadians.
Now is as good a time as ever to go over how to keep track of your money during challenging times.
With Canadian household debt so high, staying on top of your finances seems like a hopeless goal for many. As discouraging as these financial realities are, budgeting is critically important.
Fortunately, keeping track of expenses and setting budgets is actually very easy. You can get started by creating a feasible budget when you’re ready. However, seeing the results of your efforts will take time, so you’ll have to stay disciplined and follow the budget you made.
With the help of technology, there are many ways to budget more efficiently. Using these methods and resources can make all the difference in setting you on the right financial path.
Creating a System
The key to balancing your finances is having a system and sticking to it. Consistency is important.
The first aspect of building a budgeting system is recording your spending. No matter how you choose to record your spending, make sure it’s easy to see. Secondly, make sure you’re consistent. Set aside a time to focus on recording all your spending.
When you record your spending, you’re gathering the information you need to create your new budget. So, when you record your spending, sort each expense into different categories. Then tally up your totals and determine how much of your spending is completely necessary and how much can be avoided. Sort spending tallies into:
- Housing costs
- Mortgage payments
- Property taxes
- Public transportation
- Other necessary expenses
After you’re done, track two key categories:
- Things you need
- Things you want
You can record all of the above however you want. If you want to keep it inexpensive and simple, a notebook and pen will work. Or, you could use an excel spreadsheet with as many categories as you need. Again, the key is that you’re consistently tracking your finances.
Set a Budget
You’ll need to track your spending for at least a month before you have the information to make this work. This step is important because if you don’t have a clear picture of your typical spending habits, your attempts to create a budget are likely to fail. It’s easier to make a realistic budget when you understand your normal spending.
The process of recording your spending will likely open your eyes a bit. You’ll have a simple number for your necessary and unnecessary spending that will speak volumes.
When you’re checking your new information, compare each category you’re tracking to your total spending and your income.
- What percentage of your spending goes towards x?
- What percentage of your income is spent on y?
This is the part where you’ll be able to make serious changes. If you can identify the culprit behind your overspending, you’ll be able to make a difference moving forward. This is where the budgeting begins.
Using the information above, you can systematize your future spending. Set limits for unnecessary spending, and record all new spending. If you hit your limit, cease all spending in that particular category.
Speaking of systemization, should you want to take your budgeting to the next level, you may want to download an app. Money apps like Mint, PocketGuard, and Wally come with all the tools you need to track your spending.
There are apps for almost everything today, many designed with the sole purpose of helping users control their financial lives. Most money apps allow users to use their phone or other mobile devices to:
- Track expenses
- Sort categories
- Automatically calculate spending category percentages
Before you choose a particular app, you’ll want to consider your needs. Not all budget apps are equally comprehensive. Different features such as tracking recurring payments can help. In some cases, you’ll want a simple, barebones app. Some more comprehensive apps will even connect with your bank account to provide up-to-date information and updates.
Lastly, the main reason to set a budget is to reach a goal. Setting a reachable goal can help you stay motivated and keep track of your money during challenging times. Apps may help with tracking your progress, but reaching your goals takes goal setting and persistence.
Your first goal will probably be to escape any debt you currently have. After that, you can work towards other important goals like:
- A down payment for a mortgage
- A new car
- Retirement savings
- Moving Forward
Despite the simplicity of setting goals and making plans, determination and consistency are key. Having a system and setting goals will help you stay on track and recording your spending will empower you to make sensible decisions moving forward.
There’s one last important thing to remember: you don’t need to do this all alone! Debt and budgeting can often seem overwhelming and hopeless. If you truly feel like these methods won’t work for you, you should reach out for professional assistance. If you are facing financial hardship during these challenging times, please call 519–310-JOHN (5646) today.
Originally Published at www.adamsontrustee.com on November 17, 2020