Budget Basics
Introduction to Budgeting
Budgets are necessary to achieve financial freedom. People who can account for their money are people who are in control of their finances. A plan is essential to success. Imagine a business running without a financial plan, or building a home without blueprints. Not very safe.
Would you risk your investment without knowing the game plan? Yet thousands, maybe millions, of Canadians live paycheque to paycheque without investigating where they are putting their money, what their spending habits are, or when they will be out of debt.
Check out our step-by-step budget implementation of a spending plan as well as easy-to-use credit card debt worksheets.
The truth about budgets...
"A budget is restraining and limits my freedom." ...
The Truth: No, the very opposite is true. A budget grants you more independence and freedom to achieve lifetime goals.
The Thought: "I cannot solve my money problems unless I make more money."
The Truth: You may be able to solve your money problems earning your current salary with an appropriate budget.
The Thought: "Budgets are complicated and take too much time."
The Truth: With proper instruction, anyone including children can start and maintain a budget. After you have completed the initial work, maintaining your record system takes approximately 30 seconds per transaction.
Living paycheque to paycheque, with no spending plan, no end-of-the-month summary report, no savings plan, or no idea of when you would be out of debt is not the right way to plan for the future.
Do not worry about becoming a slave to your budget and savings plan. It should reflect your values and it must be compliant to your lifestyle. A budget can finally allow you to stop over spending and start saving. It will bring order and new priorities into your life. Remember to review the spending plan each income period so you can be certain your money is going exactly where you planned.
It is not necessary to have an extensive filing system for keeping track of expenses. Envelopes for receipts and account sheets are all you need. Separate expenses into fixed and flexible categories, and list them on an account sheets as you pay them.
Use business sized envelopes for each month as you go along. Then get one big file or envelope, indicate the year or period covered, and keep your monthly envelopes in it. Records from chequing accounts, tax related transactions, etc., should be saved for at least seven years. Tax returns should be saved indefinitely. For household receipts, two or three years is adequate. Insurance policies should be saved as long as they are in force.
