It is commonly known that having a solid household budget is an essential part of managing your money responsibly and keeping debt to a minimum. However, it isn’t just enough to establish a budget and hope for the best. You’ve got to set a budget that works for you in the long term as well as adopt habits and practices that will make your budget successful.
“It’s great if you’ve got a good budget on paper, but you need to use tools and behaviour around budgeting to ensure that you can translate your budget from theory into action on a daily basis,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
Do you have a budget that works? Budgeting is the best way to ensure that you spend within your means, keep your debt low and build up savings at the same time. To learn more about how budgeting can benefit you, contact one of our trained credit counsellors at or get started with our free online debt analysis .
Want to be successful with your budget? Here is our advice:
Track your spending
When you make your budget, it is important to split out your income into different categories to cover your expenses. However, you need to track what you are actually spending to see if you are on track with your budget.
“You may think that you are following your budget, but can never seem to gain ground towards your financial goals. Tracking your spending lets you know if your budget is realistic and/or detailed enough. It also lets you know where you need to improve and cut back if you are having trouble staying on budget,” says Schwartz.
Create a budget before the beginning of the month
If you create your budget mid-month, you are really only playing catch up until the following month. You are better off to spend some time in advance planning out your budget before you get paid, so that you can execute your plan most effectively when you get your income in hand and then go from there.
Place priority on the budget
In order for your budget to be successful, you need to value your budget as the absolute priority in your household. That means not making purchases until you’ve consulted the budget and living a cash lifestyle as best you can.
Consulting the budget before a purchase will eliminate impulse purchases that can derail your budget and cause you to go into debt.
Be financially literate
Learning about your finances not only makes you aware of your options with your money, but it also helps you to connect the dots between your behaviour and your financial success. It can be very motivating when you understand how your sacrifices will improve your financial situation and conversely, the negative impact and overall cost of debt on your finances if you spend beyond your means.
Be vigilant with variables
Budget accurately for variable costs. Always be mindful of how you can cut costs for things like groceries, utilities and transportation.
The more that you can trim from these variable costs, the more cash flow that you’ll have in your monthly budget.
Focus on the non-material
If you feel pressured by friends or family (or even society at large) to measure your success by having a big house, a fancy car or other material things, you may be doomed to be eternally spending beyond your means, which means that you’ll always be shouldering debt.
Adjust your attitude towards spending and material things. Simplify your life and learn to find joy and satisfaction from free (or low cost) things and experiences. Don’t try to keep up with the Joneses.
Check in with your goals
Make a point of revisiting your budget every quarter to see if it is working. Measure your progress to your goals. If there is a disconnect between your goals and your budget, it is a good idea to tweak them to ensure your success.
Does your budget have a line item for savings? If your goal is to pay down debt, it may not seem to make sense on the surface to direct money towards savings, but building up savings is actually one of the smartest ways to keep your debt down.
Take advantage of automatic savings tools (like payroll deduction or automatic savings through your financial institution).
Find a system that works for you
It’s one thing to establish a budget, but if you identify a system that works for your personality and preferences, you will be more able to execute your budget plans on a daily basis.
There are numerous free (or low cost) apps or software that lets you set a budget and monitor your spending. If you prefer something low-tech, there is nothing wrong with an old-fashioned accounts book. Some people like to use the envelope method to divvy up cash for expenses, just make sure you tally receipts to balance the books.
Adopt frugality as a way of life to ensure that you’ve always got the cash flow to stick to your budget. Wherever possible, buy something second-hand, which will automatically cut your costs. Be prepared to shop around for each and every purchase.
DIY wherever you can and don’t pay a premium for convenience. Get rid of expensive habits (i.e. smoking, drinking, playing the lottery). Avoid eating out, except for on special occasions.
Be smart about inflation
Many people receive a cost of living increase every year in an effort to match inflation. However, the reality is that in many cities the cost of living outpaces income, even with these increases.
Don’t increase your spending to match your modest increase in income. Instead, keep your spending low and use the additional income either to increase your cash flow in your household, put into savings or pay down extra on debt.
Make today the day that you take your first step forward towards a debt-free future. Call one of our trained credit counsellors at or visit our free online debt analysis .