The average income in Canada in 2020 was $66,800 and it hasn’t changed much since then. With the increasing cost of living, it has become more and more difficult for the average Canadian to live a normal life without being drowned in debt and financial worries.
If this sounds like you, then it may be time to educate yourself with a few important budgeting tips.
But where should you start? Budgeting is often easier said than done, but it doesn’t have to be as hard as you think it is either. Keep reading and learn more with the best budgeting tips listed below.
1. Start a Budget for the Whole Family
Your budgeting plan isn’t going to be very helpful if you’re the only member of your family doing the budgeting. For example, you might start off your budgeting plan very well, but if your spouse splurges every week on unnecessary items, your budget isn’t going to get you very far. This is also the case if your children use your credit card to buy things such as video games or other things that they want.
To solve this problem, you’ll want to get your entire family involved with whatever budget plan you have in mind. While it might be difficult to convince the rest of your family to follow a strict budget, it will certainly be worth it if you can manage it. Keep in mind that creating a budget plan with your family doesn’t have to be a gruelling process.
You can even make it enjoyable. For example, suppose that you set aside one day every month to sort out your family budget. You can make this day more enjoyable by putting out some snacks or turning on some music so you can enjoy yourselves as you go over your finances.
Once you get your family members on board with your budgeting plans and ideas, you will find that it will be much easier to save money. It also makes it easier to rely on one another and to hold another person accountable for overspending.
For example, if your spouse is thinking about buying something he or she doesn’t need, it is your responsibility to convince them not to buy that unnecessary item for the sake of your budget.
Once you get the hang of this, budgeting with your family will be easier than ever.
2. Pay Off Your Debt Fast
It can be nearly impossible to follow tips to budget if you are constantly being overwhelmed by debt.
The personal budgeting tips you’re following might be very effective and they might help you save some money here and there, but if a big chunk of your money is going to your debts every month, you still won’t be left with much no matter how strict of a budget you follow. For that reason, it is important to pay off your debts as soon as possible.
Of course, this is easier said than done, but it doesn’t have to be impossible either. Suppose that you have debts of all different sizes. Some might only be a few hundred dollars while others might be several thousand.
Whatever the case, you should always aim to pay off the largest debts first. Many people often do this the other way around and pay off the small debts first. This is not a good idea because you are more likely to acquire small debts faster than large debts.
Large and Small Debts
You might end up paying off a few small debts but acquire a few more soon after. Meanwhile, you’ll still be stuck with the large debts you’ve already been paying for months or even years. This is not to mention that the interest on large debts tends to be much larger compared to small debts.
For that reason, as you save up some money with your budgeting plan, you will want to pay off your largest debts. This will immediately take a huge weight off of your shoulders and your wallet. Once you pay off the biggest debts, you will find that the small debts that remain will be quite easy to deal with in comparison.
3. Track Your Progress
You won’t be able to tell how well your budget is working if you don’t keep track of your progress. Keeping track of your progress isn’t hard. All you need to do is think about how much you spend each month and how much you gain.
It is best if you can be specific with your tracking methods. For example, if you keep track of everything you spend for a given month, you will know exactly what you need and what you don’t really need to reach your financial goals. You will also be able to better categorize your spending.
For example, suppose you spend the majority of your money on food and rent. You also spend some extra money on things you don’t necessarily need like a trip to the salon or the store to buy some new clothes. By keeping track of these different purchases, you can better plan your budget for next month.
What can you cut out from your usual monthly spending? What other ways can you save money? If you really want to take your budgeting plan seriously and want to save as much money as possible in a short period of time, you can always cut out things you don’t need on a daily basis.
For example, you can stop going out to eat at restaurants and start saving yourself quite a lot of money every month.
4. Try the 50-30-20 Rule
The 50-30-20 rule is one of the most effective rules you can incorporate into your budget. It involves breaking up what you earn and spend into three distinct categories. It also involves allotting a certain amount of your money into those categories.
In particular, the rule states that you should spend 50% of your income on your needs. Your needs are things that you cannot live without such as food, rent, and so on. Then, you are allowed to spend 30% of your income on things that you want.
For example, you might want to go to the salon and get a manicure once a month or you may want to buy a nice new jacket. These are things that you could easily live without, but after all, it is important to enjoy your money once in a while and spend it on things other than what you need. Finally, you should spend around 20% of your income paying off debts and saving for retirement.
Saving for retirement is always important no matter how old you are. It is actually better to start saving for retirement early on in life. You can always alter this rule if you want to save more money or pay off more debt.
For example, you can keep yourself from buying things that you want and use that money to pay off large debts.
5. Set Big Budgeting Goals
Budgeting will be a very hard and confusing task if you don’t have a goal to work towards. There are many different goals you can choose from and you might decide to work towards several goals at once. Whatever the case, you should look to the future and think about how you want your finances to be after a few months or years.
For example, consider your emergency fund. If you don’t have an emergency fund, you should get started creating one right away. Without an emergency fund, you could easily end up in debt if something unexpected (and expensive) happens to enter your life.
An emergency such as a car accident could easily ruin all the hard work you’ve been doing if you don’t have an emergency fund to act as a buffer.
Besides having an emergency fund, you should also think about how much money you want to save in a certain amount of time. For example, if you want to take a big vacation in a few months, you should figure out how much you’ll need to budget and save to make that vacation a reality.
What You Need to Know About Budgeting Tips
Following budgeting tips doesn’t have to be an impossible task, but there are certain things that you should be aware of. When starting a budget, you will want to make sure that the rest of your family is on board with the idea. You will also need to keep track of how much you spend and save every month.
Paying off your biggest debts and setting goals are also very important. To learn more about your finances, contact us here.