Budgeting: A Simple Plan!

Twelve years ago, I received some great budgeting tips from a co-worker, Sean. Our wages were low, and my rent was high, so I needed to make my budget work. Sean showed me a simple way to ensure I was prepared for all the expenses that would come to me, using a simple method. Since then, I’ve (mostly) managed to stick to my budget, and be able to save for both wants and needs. There are some wants that are high on my list of values, such as the ability to take a vacation once a year. Even back then, I would make sure I saved 75.00 per month for travelling...not a lot, but enough to get me out of the country for a few days. Sean showed me his method, and I’ll share that with you.

I have included a sample budget, if you hit the button below. (If you want a copy of the original Google Doc, just send me an email.)++

Here’s how it works: Sean had me divide all my expenses in two columns, one for the first paycheque and one for the second paycheque.* It’s important that you consider every expense--don’t leave ANYTHING out. A public transportation pass in Toronto costs $156 for adults. But what if you rent a car, or take a train out of town every once in a while. Reserve some money for those inevitable costs. If I get my haircut every two months, then I need to budget 14.00 per month (this will cover the 24.00 haircut, plus a tip…). 

For periodic expenses, such as clothes, haircut, travel, uncovered medical expenses, birthday gifts, functions like weddings, I created a separate savings spreadsheet to divide the money. It’s good to add an emergency fund for unforeseen future expenses. You may need to pay income tax, so you need to save for this. (If you get a tax return instead, then great! Put it into savings.)

*One good thing about this two-paycheque division is that not all months in the year have only two paycheques. In two or three of them, there will be an extra paycheque, which means you can put all that money into savings categories (like travel, that guitar you’ve been saving for, gifts, clothing, etc), or put it into your emergency fund, investments...or to balance your budget if you don’t strictly follow your budget each month. (I suppose it could happen!)

++Disclaimer…I’m not a financial expert, so I recommend reading more on the subject from some of the excellent books on the subject (many will suggest spending only 1/3 of your income on rent—difficult in most large cities—and putting more of your money into investments, like ETFs, allowing them to grow through the power of compound interest).