Your personal budget

We all know the importance of making a budget but calculating how much we should spend on each category is no small task.

Where to start? A budget has 3 types of expenses:

Fixed

These expenses are easy to determine because they are the same every month and must be paid at regular intervals (e.g. rent, car payment, insurance, etc.).

Variable

These are expenses that come back on a regular basis, but vary from month to month (e.g. food, personal expenses, clothes…). Unless you meticulously note each expenditure for each category for at least 2 months, it is difficult to determine the amount accurately. We must therefore estimate a reasonable amount to start, and we correct with the amounts actually spent over the next 2 months.

Irregular

These expenses occur at any time of the year and the amount is often not known in advance (e.g. car repair, house maintenance, tires, etc.). Just because they often come up unexpectantly doesn’t mean that they cannot be planned. The replacement of a roof or winter tires can be planned ahead of time. A sum should therefore be set aside every month for those irregular expenses.

Example

Although every situation is specific to each, we have created a model budget for a typical family, i.e. 2 adults + 2 children with 2 salaries of $45,000 each, before taxes. This corresponds to a net family income of approximately $68,000/year (or $5,666 per month).

Using the percentages allocated to each budget item, you will be able to see if your expenses are lower or higher than what is recommended for that income bracket.

Here is the suggested breakdown of expenses for a net family salary of $5,666/month:

CATEGORIES	%	MONTHLY*
Housing (incl. heating/hydro)	33	$1,870
Transportation	18	$1,020
Food	20	$1,130
Leisure/holidays/sport	8	$450
Clothing	4	$225
Telecommunications	5	$280
Personal expenses	5	$280
Savings	5	$280
Variables	2	$115

 

*These figures are for illustrative purposes only. Each person and family has its priorities and reality, so the budget is unique to everyone and should be prepared using their actual expenses. Our advisors can help you prepare your own starting budget.

What should savings be used for?

• Short-term

A working capital equivalent to 1 month of expenses so that you do not have to use the credit to pay your current expenses.

• Medium term

An emergency fund equivalent to 3 months’ salary in case of illness, job loss, urgent repair, etc.

• Long-term

A retirement fund (RRSP, TFSA and RESP).

No amount is too small when it comes to savings. If you put aside a small amount from each paycheck, you’ll get used to living without that money and you’ll save without realizing it.

Involve the whole family

Involve your children in the discussions for the expenses that concern them (allowance, vacation, clothing, sports, etc.). The exercise will be beneficial for them in the long run, and it might increase awareness!

Where to start?

To start working on your budget, go to our online budget tool. Working with a reliable online tool will help you not to forget certain expenses, will help ensure correct calculations and will allow to adjust and change amounts quickly without having to recalculate each time.

If you have any questions or need help to prepare your budget, don’t hesitate to contact our personal finance experts, or book an appointment. It’s free, confidential and without obligation!