Money Management Strategies - 7 Steps to Build a Household Budget
Think back to your very first paycheque – paper route money, babysitting income or a cheque from a part–time job. Did it come with instructions? Instructions seem to be included with the simplest devices these days, and yet, with something as important as our paycheques, we’re left to figure it out on our own. No one is born with money management skills. By the time we’re adults, we are expected to be able to manage our money effectively; however few of us are taught how. Therefore, many people experience the usual emotions that occur when they don’t know how to do something well. These may include:
Like driving a car or playing an instrument, the skill of managing money must be learned – and it’s never too late to start! Doing so usually pays immediate benefits. People might not earn more money if they budget well, but they will be able to use the money they do have wisely.
What does a financial savvy person look like?
Someone who manages their finances responsibly has peace of mind and knows how to:
- Pay their living expenses
- Keep debts to a manageable level
- Save for the extras that make life enjoyable
- Avoid constant money anxiety
It’s not how much you make, but what you do with what you've got. Proper money management does not involve a magic formula to find more money. It simply means getting the most from the money you do have.
Take a quick look at your current money management skill level
Answer the following questions truthfully, based on what you do today. Ask yourself how much effort do you put in managing your own money? Do you keep track of what you spent in a day, week, or month? How many times do you regret spending so much money on something that will benefit you so little? You do not need to share your answers with anyone – they are merely to help you identify how you may want to improve your own money management skills.
The foundation of sound money management is the budget. However, for many people, the word "budget" evokes feelings of fear or frustration. Your budget is your plan for your money. It is based on choices you make and priorities that you identify.
Building a spending plan, or budget, is a step–by–step process. Once complete, your budget is the solid foundation with which you can manage your current income and expenses and plan for future possibilities.
Is the economic downturn causing you to consider your personal financial situation? You may be worried about losing your job or how much debt you have. Avoid a potential personal financial crisis; get back to basics with a budget you can stick to. Here's how to start:
You probably know how much you earn each month – but do you also know where it all goes? Find out by tracking what you’re spending. Spend as you normally would, but for a few weeks, jot down every cent you spend. It’s easy and you might be amazed by what you find out.
Ask yourself: Do I want this or do I need it? Will spending this money get me closer to my financial goals or further away? Can I live without it? Set clear priorities for yourself and the decisions become easier to make.
Make sure that you are not spending more than you make. Balance your budget to accommodate everything you need to pay for. To make all this easier, try using our super user friendly, free, Canadian budget calculator that you can download for Excel or Open Office and use as a template for your personal or family budget.
Match your spending to when you receive your income. Decide ahead of time what you’ll use each pay cheque for. Ask yourself: Have I allocated money for my necessities (housing, food, utilities, transportation, etc.)? Have I put money aside for my debt payments, unexpected expenses, savings and the fun stuff? This will protect you from going into debt further because you won’t rely on credit to pay for your living expenses.
You know that things will “just come up” – school expenses, new shoes or an annual membership. Set money aside to pay for these expenses so you can afford them without going into debt.
Getting on track with a budget can take a month or two. You’ve lived all this time without a spending plan, so give yourself time to adjust. Don’t be afraid to ask for help if things aren’t falling into place – we’re just a phone call away.
Download the Workbook
The steps you are going through can also be viewed as a PDF download in a workbook titled, 7 Steps that Will Help You Build a Budget that Works (you can fill out this PDF and save your work).
If all this looks like too much work, or you're really looking for something much quicker right now, check these out: