Whether you’re looking to save for a vacation, a down payment on a home, or you simply want to gain some insight into where your money is going – creating a budget is a great place to start. But how exactly does one create the perfect budget? Let’s break it down.
Are you looking to save for an emergency fund? A new car or vacation? Maybe you want to buy your first home in a year, or furnish your new apartment. Whatever the case, make sure to set some clear goals at the onset. According to Mint, “you don’t have to justify your goal to anyone, and envisioning it can help keep you on track”.
This next step in the process is crucial: spend some time analyzing current spending habits by tracking all of your expenses. TD Canada Trust suggests reviewing statements and keeping receipts for everything for a few months. An even easier way to keep track, is to download an app that does it all for you.
“Once you’ve got a good picture of where your money is going, it will likely be clear where you could (or should) be spending less,” says Time Money. They go on to suggest that picking two or three “problem children” is a good place to start. Eliminating that daily latte, for example, can go a long way.
There are a pile of free budgeting tools and templates out there, so do some digging and find one that works for you. Or if you’re really feeling it, you can even create your own in Google Docs or Excel. A budget spreadsheet will help you track and compare your actual spending to your intended budget. According to Time, “your goal should be to reduce your spending to under 90% of your income, with the aim of saving the rest…” (hello, vacation!)
According to TD, your expenses and therefore your budget, will vary from month to month. “By checking in regularly and monitoring progress, you’ll keep your budget effective and relevant to your savings goals, making it easy to see the positive difference.”