My thoughts, points and examples on budgeting

I could go on and on about budgeting, as you will see below :)

Creating a budget plan can help you see how much money you have, how much more you need, or how to cut back on non-necessary expenses. You can use a budget to see where you may be unnecessarily spending money, or where you could be saving money by cutting out extra fees and charges for some item.

Budgeting can be even more crucial for those who are self-employed or are on commission, and don't have a fixed amount of money coming in each month. If your income varies, determine the least amount of money you expect to make in a month. Build your budget around that amount; you can put windfalls from better months savings or to get ahead on other bills.

If you are a seasonal worker, then make sure to put money aside for the periods you are not working.

Here are some points and suggestions on budgeting:

#1) Everyone should have one

No matter what income bracket or stage of life, I do feel everyone should have one. Well maybe if your a big star making millions a year it doesn't really matter :)

I believe it's important to always have short term and long term personal & financial goals in life. To help set financial goals you need to know where your money is going each month and areas that you should adjust due to putting to much/to little into certain categories.

#2) Detail is key

You need to be as detailed as possible or the budget won't be accurate.

When I worked at the bank there was over 100 items in the system to work from. This seems excessive, but it was so I could try to get as accurate a budget for my clients as possible. Many items would end up being $0.00, but it helped open my clients minds.  They may have forgot about certain items such as coffee, clothes, hair cuts, bank fees, annual fees on your visa, magazine subscriptions, Netflix monthly payments, vet bills, parking, vehicle maintenance etc. etc. etc.

Many people deal with certain items as they come up. I.E a $300 maintenance bill on your car every 3-6 months for oil changes and other tune ups (of course this could be less or MUCH MORE depending on your vehicle. Why not have this as a monthly expense, then when it comes time to do the work you don't need to put it on credit. For example I put $50.00 a month away into a separate account called vehicle maintenance and then have $300.00 every six month. You can only do your best to predict what these amounts are going to be and if you don't end up having enough when the time comes, well then at least you have some cash to put towards it.

#3) Avoid visa debt at all cost


I bring up visa debt here as I know many people use their view in their monthly budgeting. Honestly, I use my visa on a daily basis, so I can get visa points and insurance on certain items, but I make sure I have it in my budget to pay it off right away. Don't do this unless you feel you are disciplined enough to make sure it's payed off ASAP :)

If you are as detailed as possible in your budget, including things like vehicle maintenance, vacation allowance, household maintenance etc. etc. Then it will help you avoid putting it on visa which is most likely 10-20% interest, ouch!

I know this point is easier said then done, so if/when you do need to use visa, please adjust your budget for a few months to have it paid off ASAP. There is always a place in time for visa debt and other debt, but trying to avoid paying the 10-20% interest is in everyone's best interest.

#4) Review the budget on an ongoing basis

Things change by the day, month, year, so make sure to update your budget accordingly. I usually check my budget every day, this may be a bit excessive, but the reason I check it every 1-2 days, is because I adjust it for items we bought that week (you will see an example later). If I go in every day or two then I remember better, what I actually spent the money on. I use excel and minus money from our budget items based on what we spent that day. I then see what money we have left to spend on that item and see if the total amount we NEED adds up to the total amount in our BANK ACCOUNT. If we have less money in our bank account than we NEED then adjust variable items such as eating out, entertainment etc. If we have more money then we increase my variable items. This takes me 10-20 minutes a day to complete

I don't write everything I purchase down on paper, I go based off what I remember. If you find it easier to have a notepad and write things down to be more accurate, then do so. If it's your first time budgeting then maybe have everyone in the family write things down for the first month or two and review it together. Don't forget that cup of coffee, pack of smokes, shampoo you bought etc etc.

#5) Pay yourself FIRST

What I do, is as soon as my husband and I are paid, I look at my budget for that PAYDAY, look at the TOTAL amount I NEED and compare it to the ACTUAL money in our BANK ACCOUNT. I add items that have come up that month, that aren't usually in the budget (items I bought online, course I registered for etc.). I then see what I have left over and put it all towards savings. This savings may be an RSP, tax free account, vacation account or other savings account. People may do the opposite, as they want to see what money they spend first, then at the end of the pay period, put anything left over to savings, as they are worried that things may come up. This is understandable, but I find if I transfer the money right away, then I don't even notice and don't miss it. If something does come up, you usually access a tax free account or savings account very easily and just transfer it back if needed.

I always put SOME money towards savings, even if I do have debt. The reason is, if something major comes up, then I have some savings to put towards it, which helps avoid me going into more debt. That said, if you do have large amounts of debt and/or lots of high interest debt, it may make more sense to put all the money you have left over to that debt first, then once its paid work on your savings. Everyone is different.

#6) Look at your short and long term personal and financial goals and add them in the budget

 Again everyone is different, but here are some examples.

Example: If you like to travel and want to go on a trip that is $2000 and your paid twice a month, then put $83 away per cheque into an account specifically set up for travel. You will be surprised how it adds up. If there is a major expense along the way you can then take the money out and use it for that expense and skip the travel if needed, boooo!

Example: If you like to buy nicknacks, then have it in your budget. I have $200/month in our budget to buy nicknacks i.e. computer games, toys for our daughter, plants, crafting supplies etc.

Example: If you want to buy a used car in 2-3 years then start saving now. Many people don't do this, and honestly I didn't do it the first time I bought my car either, I put it ALL on credit. At the end of the day the more money you have saved, the less you need to borrow, the lower your monthly payment will be and the less interest you pay :) I.E if you want to buy a vehicle worth $10,000 in 2 years and are paid twice a month you would need to put away $200 per pay. If the vehicle you want is more or less than this obviously adjust as needed, this is just an example. If that $200 is way more than you can afford now, then put in less now and more later (if you can) or only put some money down and borrow SOME, you will still have a lower payment and interest cost. I.E say you have a visa debt then maybe put $100 per chq to the car now, pay off your visa in the first year and then put $250-$300 towards the vehicle in year two. Again all just examples, but the point I am getting to is plan ahead for bigger priced items as again the less you borrow, the less interest you pay and the less STRESS it causes.

#7) If you have automatic withdraws/payments, make sure to include them in your budget!

One mistake many people make is to set bills on automatic withdrawal, and then forget about them. This can lead to overdraft charges, which is usually a high amount of interest. If you include that payment in your budget plan, you'll be more likely to remember it, and you'll be controlling your
spending with that payment in mind.

#8) Make sure to include everyone who is earning and/or spending your budget planning and discussions

Some households leave the budgeting up to one of the partners. I believe having both included in each step of the planning is key! Each spouse has different hobbies, interests and thoughts on money, so each should be included. Also make sure to include the children, once they reach an appropriate age. Include them in all of it or some of it. This will help them learn about money, be aware they can't just buy everything they want and help you understand what is important to them. Show them how much your putting away each month for their future car and/or education, I think they will appreciate it more, see where it's coming from and learn from your experiences!!

Be honest with each other! I had a set of clients come into my office in a panic. One of the partners had spent a significant amount of money on gambling, the other spouse had no clue until recently. Even worse, the funds were put on their credit line. Money can cause huge rifts in relationships, so be honest and up front with each other. My husband often wants to buy video games. I start the conversation with "where is that money coming from". In the end he gets the game, as he doesn't buy them often and we can usually work it in the budget, but it makes us sit down together to look at our budget and goals that month. I am sure he sometimes gets annoyed by this, LOL, but he knows in the end it's helping our entire family now and in the future.

#9) Ask for payment dates that work for YOU

I have had many clients say they get behind because they have to many expenses on the 1st of the month or that they have very random due dates such as the 8th or 22nd and they are paid on the 1st and 15th and therefore find it hard to keep track of the random dates. Choose dates that work for you. If you have a large MONTHLY mortgage payment on the 1st that isn't working, ask your bank to change it so you pay it semi-monthly or bi-weekly (depending what works for you). Call your phone/internet/cable company, see if they can change your due date. Call the providers of your loans, credit lines, visa again see if they can change your due date, to fit your needs and make things easier for you. Sometimes this can't be done, but it's worth a try.

Idea of how I do my budget

There are tons of worksheets online that you can look at and chose which one is best for you. Here is an idea of what I do:
- As I mentioned above I use excel
- I have two SEPARATE sheets one for the First of the month and one for the Middle of the month
- Under each sheet, on the LEFT column I have my budget category i.e. gas, car insurance, bank fees, entertainment, eating out, monthly vehicle maintenance, savings, emergency account, travel etc. etc.
- On the right I have the amount of money I budget to spend on that category that pay.
- At the bottom of the RIGHT column, under the AMOUNTS, I add a formula that sums up the total of the above column. I then see how much money I NEED to meet all my budget amounts that pay. Example my formula shows =SUM(B1:B22) as I have 22 items. I hope this makes sense, if not pop me a question anytime :)
- Then for example on May 1st, I will go to my budget for the first of the month, see the TOTAL I NEED and then see the TOTAL in our bank account. We are paid salary, so this is almost always exact.
- I then add items that have come up that month i.e. I sometimes add gifts for that month for a birthday, if we have family coming into town then I increase our grocery expenses etc..
- I then also adjust each category total depending on things that come up i.e. I usually spend $100 on our phone bill, but maybe something came up that it's higher, so I would then increase the phone amount by the required amount and decrease my amount towards a variable item such as travel, savings, entertainment, eating out. I try to always decrease eating out or entertainment first, as I really want to have savings and money for travel. That said, we like to enjoy life to, so I always try to keep in money for eating out once a week and going out for entertainment and buying those bottles of wine 1-2 times a week. Everyone is different of course! Then at the first of the month I know exactly how much I can spend on my variable items and keep them in mind when I am spending.
- On the 1st of the month AFTER I have made my adjustments as per above and see that I am on track, I then PAY MYSELF FIRST. I put the money I have budgeted towards savings, vacation, emergency, vehicle repairs, nicknacks etc. etc. into my other accounts. I get the money OUT of my day to day spending account as quickly as I can, so I don't miss it. For me, I have one main account for my day to day spending and I have several other savings accounts nicknamed so I can track my money easily. I put money in and out of them as needed. I.E I have a savings account named emergency funds, one named vacation, one named vehicle maintenance etc etc etc. for everyone, this will look different
- Going forward, at the end of EACH day or two, I go into my budget and deduct things that I have spent. I.E if I spent $100 on gas and my gas spending is $200 then I will change it to $100 (as I already paid $100). I continue to do this almost everyday. You can do this daily, every few days or weekly. Again I try do it daily so I remember easier and so I have fresh in my mind how much I can spend.This takes me 10-20 minutes if that. I again match up the TOTAL sum of what money I still NEED that month based on my excel sheet and compare it to what is in my ACCOUNT. I adjust as needed. Maybe we spent a bit more than I remembered, so I will take away from variable categories such as entertainment, eating out, nicknacks etc.

Fixed Expenses 

Some expenses that qualify as fixed for most people may be non-fixed, or variable, for you. I.E everyone has different phone bills, some are fixed, some are pay as you go, for those that use long distance a lot it can change greatly each month.


For the example above, in excel I would recommend to put all your FIXED expenses first and VARIABLE expenses second. Money to savings is always a variable expense, as you can stop it anytime, but for me I really try to keep it FIXED as much as I can.

Fixed expenses are those that usually stay the same each month

Examples: mortgage/rent, car loan, condo fee, property taxes, installment loans, insurance, utilities (if you signed up for a fixed amount), cable, childcare, internet, phone (unless you go over your plan allotments), child support, tuition, bank fees (unless you go over). A point here, which I may touch on later, REVIEW your bank statements, see how much your spending in service fees, go to your bank if you feel it's to much. For example I had a client who was a student and opened her first savings account, which you pay per transaction. I checked her account two months later and she was paying over $50.00/month in service fees. She already had a chequing account, but she was using both the chequing and saivngs for day to day items. I called her in to review her accounts and she was happy, but if I didn't check for her, she may have gone on doing this for months/years without even realizing it. If you use a lot of debit you may need a unlimited bank account. Some accounts are unlimited, some you get a certain amount of transactions a month and if you go over the charges can be high!

Can you cut down fixed expenses?? For everyone the answer is different, but for most yes you can. Here are some ideas if you need to cut them back.
Mortgage = If you are in a difficult situation, maybe check with your mortgage company to see if you can lower your payments. This is going to make you pay more interest in the long term, but if your in a situation where you really need this, then you can check. If you have a large expense come up suddenly, maybe skip a mortgage payment (if possible, check with your bank to see if it is) and use the money to pay it, instead of high interest credit.
Cable= Look at different cable companies, change to a cheaper package, cancel it. Share the bill, if you have a teenager that really wants certain channels maybe ask them to chip in, this will help them learn a bit about the value of money. When I was living in Canada we were paying tons towards cable and internet. I didn't think I could live without cable. I now live in Japan where the cable is in Japanese, so we don't bother ordering it. We find other things to do instead, go outside, find programs on you tube or other means.
Phone- Go to a more basic plan. Use Skype instead of long distance, get teenagers to chip in etc.
Loans- If your paying high interest or several loans maybe go to the bank to look for lower rates or to put them to one payment. This may or may not save you money. Don't have your credit pulled to often, as it effects your credit score! I put this here because if you plan to shop around at different banks, just make sure they don't all pull your credit report.

Other tips to decrease expenses:

One by One: Study your budget to see which fixed expense you might be able to get rid of. Choose one monthly bill, such as your car payment, that you will eventually pay off. Set aside as much as you can to pay it off early or sell an asset and pay it off. Even if you only make one extra payment a year, you can really make a difference. Remember, anytime you can cut out an expense, you now have that extra amount to save or put toward other expenses.

Downsize: Get a more economical vehicle, downsize your home

Share: Get a roommate, have an exchange student come live with you for a few months or the full year to share some of the expenses.

Variable expenses

Variable expenses are not definite and can change. I really TRY to FIX almost all my expenses each month. However in the back of my mind, I know when OTHER things come up, I can decrease or eliminate variable expenses for a short or long period of time.

Examples are groceries, retirement savings, education savings, eating out, entertainment, poker nights, money going towards vacation, money going towards vehicle maintenance, money going towards household maintenance, utilities (if your on a variable plan), money going towards personal and pet medical bills.

These are items you really need to watch. If its your first time creating a budget, go back 3-6 months and look at your bank account and visa statements to see how much you have been spending on areas such as eating out, entertainment and groceries, you may be spending way more than they think. You can do this manually or some banks have programs that can do this for you.

Cut back if/when needed, but still make sure you enjoy life!!!! Life is sometimes to short and you could be spending hundreds of dollars towards your future retirement and never get to use it due to major life event.

Everyone is different for how much they need. For example if you own a very large home, you would need to put away more money than someone who is renting. If you own a condo a very large levy can be put on you at any time, due to the needs of your building, so make sure to have some money put aside. I had this happen, and had to come up with $5000.00 within a couple of months. I had a client that needed to come up with way more!

The Bottom Line
If you need to start cutting back on costs, look at both your fixed and variable expenses. Devoting a Saturday afternoon to reviewing all of your subscriptions, insurance plans, and recurring monthly bills may help you trim hundreds of dollars from your fixed monthly budget.

What to do if your expenses are more than your income

- Use your bonus, commission cheque or tax return to pay down debts if it makes sense.
- Go to your bank, see if you can decrease mortgage/loan payments and or banking fees.
- Get a second job or work overtime. I don't like this one as I am a strong believer in enjoying life also, but if you have to do it for the short term to get ahead and help your planning then maybe it's a solution.
- Have someone in your household that is at home look for a job
- Look at where your money is going and decrease spending in some/all areas
- Have someone rent an area or room of your home 
- Sell some assets to pay down some of your debts and get rid of items that have huge expenses attached to them i.e. a vehicle with large loan payments, parking costs, maintenance and insurance. Compare other methods such as transit vs. having that vehicle. Then maybe rent a vehicle when needed for longer trips. Sell that boat or trailer that you don't use. I have had many clients come to me, in a financial crisis, who didn't want to give up their boat/trailer/quad etc. even though they didn't even use it. As I mentioned, you want to enjoy life, so if you and your family actually do use these items, then try and make a way to keep them in your life. However don't let them pull you down either!
- Ask family to help out. Many people don't want to do this, but it is a choice. I had a set of clients that lived in a very small town that was struggling. They both lost their jobs and had to sell their house at a loss of roughly $30,000. They also had about $20,000 in other debts. Their parents really wanted to help. What we ended up doing is putting a 10 year mortgage on their parents home and having the payments come out of their children's account. The children didn't qualify on their own and even if they did the loan would most likely have to be paid over 5 years, which means a high payment. At this point they had found new jobs, but were stuck with this debt and very high payments. This decreased their payments greatly and got them a low interest rate. This type of suggestion I had only made once in my career, but the parents were very eager to help. They knew the risks going forward if their children couldn't pay and were willing to help them.

If you have made it to the end of this blog, then THANK YOU :) I hope some of my thought, points and examples help you out. If you feel embarrassed about your current situation, remember I am sure there are MANY others out there feeling the same way. Share experiences with friends/family/kids/colleagues etc. as I am sure we can all learn from each other! If my tips make you a millionaire, then make sure to share some with me, LOL, just kidding!

All the best,
Jackie

Financial tune-up.

I haven't posted in a while as I wasn't sure how my blog was coming across :) I am passionate about trying to help people get through the mumble jumble of finances, however I have never sat down to actually write about it. Also, I can't say I am an expert by any means, I worked in the bank for 12 years and have completed some financial courses but do not have a Financial Planning degree. That said, sometimes I feel I lack the experience to actually sit down and give advise on money :).... My posts are more about trying to increase knowledge of finances.

I do truly feel that we should be taught about money from a young age. I am sure some people are, but most people I ask say they were never educated about finances. I have for sure made my share of mistakes and am far from perfect with my own finances, but feel I am better with my finances compared to where I would be if I didn't work at a bank for 12 years. That is where I gained my knowledge, not in school, not from mentors, but from hands on experience at the bank. Not everyone wants to be a banker (and I don't blame you), so who better to get a bit of info from, then from a previous banker??

I am not an expert writer, so hopefully what I say makes sense, if not I am open to feedback and questions. Also, feel free to share your experiences as I am sure we can all learn from each other.

My topic today is 10 items I recommend you do in the next 12 months to give yourself a financial tune-up. Some of you may have done none of these, some may have done a few and some may have done them all. Anyway, here we go with the basic points, and I will expand on each of them, one at a time, in future posts.

1) Create a Budget.

2) Get an Idea of your Net worth

3) Set short term and long term goals

4) Make sure to pay yourself first with AUTOMATIC contributions

5) Work TOWARD being and staying debt free.

6) Look at your interest rates

7) Never forget to set up and review your emergency reserve account

8) Make sure your family is protected

9) Check your credit report

10) Check your investment portfolios, learn about what your invested in and re-balance them if needed