/ Finance 101

Build a budget for the new year

It’s the perfect time of year to launch your new household budget.

If you haven’t already mapped out New Year’s Resolutions for 2017, consider adding budgeting to your list.

Building a budget can be easy, educational and even inspiring when approached the right way. By following the steps below and keeping an open mind, you’ll be able to create a household budget that reflects your spending behaviours and can help you find new ways to save in the new year.

Step 1: Understand where you spend your money

Tracking your spending may take a bit of time, but it’s an important step to creating your budget. Fortunately,  there are lots of online tools, apps and tricks to make this step easy. To get a good idea of your spending, take a look at the last three months’ worth of expenses.

Here are a few suggestions to help you get started:  

  • Online banking: if you’re a regular debit or credit card spender, your online banking platform likely offers software that can identify your spending patterns
  • Budgeting apps: tools like Mint, Dollarbird and others can sync your accounts and track spending on your behalf
  • The old fashion way: print the last three months of your debit and credit card statements and grab some highlighters. Pick a colour for each expense category, using categories like household expenses (including food), utilities, bill or debt payments, clothing, entertainment (including eating out at restaurants), child costs and savings. Highlight your expenses based on the categories you define.

Whichever method you choose, total each expense category and divide by three. This is your average cost per category per month.

Building a budget can be easy, educational and even inspiring when approached the right way."

Step 2: Determine how much money comes in vs. how much goes out

Now that you know your spending patterns, it’s time to figure out how much money you’re bringing in. Calculate your income each month for the last three months; include all income sources in your calculation, including paycheques, Government benefits, pension amounts, etc. Add up your income for the last three months, and then divide by three. This is your average income per month.

Now compare that amount with your average monthly expenses. Is there a gap between expenses and income? Are you saving money, or are you losing money each month?

Step 3: Find the balance

If your ins and outs don’t match at first, don’t panic. It’s easy to have irregular spending patterns when you don’t have a budget – that’s what brought you here.

To help you balance your budget:

  • Keep an open mind as you review your balances and look for opportunities to reduce expenses. Any way to save money should be investigated.
  • See if there are “quick wins” that could save you money in the short-term, like cutting back on lunches out at work or skipping a second daily cup of coffee. These quick wins can help get you on track in the short-term, but may not be long-term solutions.
  • Set longer-term goals for your money. Are you able to establish new spending and saving patterns, like adding couponing to your regular grocery shopping regime? What about prioritizing higher-interest debt repayment so your more expensive debts are paid off first (while still staying on top of lower-interest debt, of course)?

Learn more about setting short-, medium- and long-term goals for your money on the Financial Consumer Agency of Canada’s (FCAC’s) website.

Step 4: Rely on Resources

Online budgeting tools can support you as your balance your budget. Try the Government of Canada’s budget calculator, or other resources from the FCAC’s budgeting and money management website. For easy tips to help you save money you can also check out the Lifestyle section of our blog, where we post everyday tricks to trim your budget like cutting down on small luxuries and how planning meals can help you save.

If taking a closer look at your finances has made you realize you could use some assistance in paying down debt and getting your finances back on track, check out our debt consolidation calculator or call or visit your branch today and find out how CitiFinancial can help you save.

Step 5: Refine over time

Approach your budget as a work in progress. Now that you have a good idea of your monthly income and expenses, find out what money-saving tactics work for you. If you find it’s too difficult to cut household expenses, for example, or know there’s no way to cut down on child-related costs, see if there are other expense categories you could look to for savings.

Although it takes time and effort to track your spending income, you’ll find building a household budget has huge benefits. A budget can help you make smart financial decisions, change your spending patterns and prepare yourself for unexpected expenses in 2017.

Remember: the first step to budgeting is getting started. If budgeting is one of your New Year’s Resolutions, you’re already on your way to achieving your financial goals.


This article is for informational purposes only. For personalized financial advice, you should contact a qualified financial advisor.

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