François Bégin

By François Bégin

October 22, 2016


How to Make a Simple and Efficient Budget

Article revised on 17 April 2018

Making a budget is probably the most unpopular task in the world of personal finances, which may be why only 47% of Canadians have one! But budgets are a must. Keep reading, I have a challenge for you!

In my last article, I talked about the four steps for getting your finances in order. If you followed those steps, you’re close to the objective of creating a budget.

But before going further, here’s a question: What good is a budget? I believe that most people don’t like making a budget because they haven’t found the right answer to that question.

Here are 3 words that should not be applicable to your budget

  • Inflexible: Budgets should evolve according to your needs, so they should be flexible. Don’t try to make it with everything entered down to the last cent. You’ll become discouraged easily if you try to think of and include every single expenditure. It’s just not realistic!
  • Dictatorial: Your budget shouldn’t dictate how you will spend your money. You should not be a slave to your budget; it should serve your needs.
  • Set in stone: Your budget is constantly evolving. It’s not a document that is done once, and then is resolute for the rest of your life. You need to revisit and redo it every season.

In short, a budget is a bit like a compass. Its only purpose is to indicate the right direction and show you if you’re on the path to managing your personal finances. It will indicate if you spend too much, don’t earn enough or if your finances are balanced.

Are you ready to take on my challenge and make a budget?

  1. Begin by calculating your net income.
  2. Then enter your main expenses.
  3. Now calculate what percentage each of your expenses represents.
    This is how it should look:
    Housing (rent, mortgage, taxes, insurance)25 to 30%
    Food 5 to 15%
    Services (electricity, heating, telephone and internet)5 to 10%
    Transportation (car or public transit)10 to 15%
    Clothing2 to 7%
    Recreation and education5 to 10%
    Health (insurance, dentist, glasses, medication)5 to 10%
    Debt repayment5 to 10%
    Savings5 to 10%
    Emergency fund 5 to 10%
  1. Okay, now this next step might be painful. Calculate the difference between your income and your expenses.
  2. The result will tell you if your budget is balanced or not.If it’s not, you have two choices: earn more or spend less. You could, for example, adjust your expenses according to the percentages mentioned above.

To help you get a handle on your finances, feel free to consult a financial security advisor. He or she can guide you through the process of balancing your budget.

But it’s not a done deal!

Repeat the process whenever you feel your budget doesn’t reflect reality. If you apply this advice and repeat the process every season, who knows, you might start having fun doing your budget.


Check out his next article: 5 Tips for Getting Out of Debt

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