1. Review money in and money out.

Before you can create a budget, you will need to know how much money you take home after taxes, how much your expenses to live are (rent, mortgage, utility bills...etc.), and your spending (entertainment, dinners, nightlight...etc.)

Hopefully when you tally up the numbers you are left with a positive balance every month. If you are negative, then it means you spend more than you are paid, and some adjustments need to be made.

2. Income

Review the net income you have coming in after taxes. This is what is actually deposited to your bank account. If you get variable pay, (commission, bonuses), you should use the average of the last 6 months or last year if possible.

3. Fixed Expenses.

There will be part of your spending that is fixed. This will include the cost of living like mortgage, and rent. Some banks do allow you to reduce your mortgage payments but be aware this may mean you'll end up paying more in interest in the long run.

Also consider your debt obligations like making payments on your loans, credit cards, and other things you owe. Don't forget to include what you pay for home and auto insurance, subscription services like Netflix, and Amazon. These items will fall under fixed expenses.

4. Variable Expenses

These types of expenses would include gas, utilities, groceries...etc. because the amount you pay each month depends on how much you use. Some of those can be reduced if you use them wisely. You can always cut down on groceries if you find you throw out groceries every week that go bad before you can eat it. Utilities can be reduced by being more conservative with electricity and water usage.

5. Saving and Investing

You should always have an emergency fund, and then start saving and investing. Consider what percentage of your income can be put aside for this, but it should be necessary. Each person's financial picture is different, but we always recommend that you at least have a TFSA (Tax Free Savings Account). With this account you can invest, save cash, and still have access to withdrawing the funds. Because the account is tax free, you can withdraw without paying taxes on anything that your investments have earned. A more long-term investment strategy would be to use a RRSP (Registered Retirement Savings Plan). One thing you can do is also remember that if you are a part of your employer's pension plan, you are technically already saving for retirement. However, remember that you cannot withdraw from those savings until retirement, so having your own savings in a TFSA or RRSP should still be important.

6. Non-Essentials

If your goal is to save and invest, or to pay down your debts aggressively, then you need to put a cap on how much you spend on non-essential items like going out, drinks, dinners...etc. It can be easy to overspend on fun activities, but it reduces the amount you have to save, and may even make you end up borrowing funs. This creates more debts and puts you farther away from achieving your financial goals. Notice that non-Essentials is at the bottom of this list as making sure you have enough money put aside for the other items is more important.

Additional item to consider

If you have a specific financial goal, then you can adjust your budget to help you meet that goal. If your goal is to save up an emergency fund then you can allocate any extra funds to go towards saving and reduce the amount you put towards non-essential spending. Maybe after you've saved up your emergency fund, you will consider saving enough for a vacation next year. Once that is saved, maybe you'll consider tackling your debts to pay it down faster, but still staying invested. Saving for a home means you should at least have a FHSA (First Home Savings Account) so maybe you start contributing as much as you can to that while also paying down debts.

Having a goal for your budget is key to helping you get there faster. You will have a better idea of how to do this. We recommend always meeting with a Financial Advisor at least once a year to review your banking, investments, and spending.