Step 1: Determine your income

When creating a budget, the first step is determining your income. Understanding how much money you make is essential to know how much you can spend. Rather than budgeting for your gross salary, focus on your NET INCOME, as overspending is a result of budgeting for too much.

Step 2: Track Your Spending

Your spending should be determined once you have determined your income. Breaking down where your money goes and making some priorities will help you gain a better understanding of your spending. Identify your fixed expenses – those that remain constant monthly, like car payments, loans, rent, or mortgage costs. As a next step, you will want to take a close look at your variable expenses – groceries, gas, entertainment, etc. – and determine what your average spending is. As a general rule, people tend to be able to cut back in this area the most.

Step 3: Set Realistic Goals

In order to maintain long-term financial health, it is crucial to set realistic financial goals. In order to cut costs or scale back on spending, it is crucial that you determine what you cannot live without and where you can cut costs or scale back on spending. It is ideal to use the 50/30/20 rule when it comes to your monthly budget in order to ensure that your budget will fit into the following categories:

The majority of your spending goes toward essentials such as rent or mortgage payments, car payments, utility bills, and groceries.

It is estimated that 30% of your income goes to wants, such as shopping, vacationing, streaming services, and so on.

The majority of your income should be dedicated towards SAVINGS OR DEBT, which can be used for emergency funds, retirement plans, children’s education, and/or credit card payments.

Step 4: Make a Plan

Once you have set your financial goals, you will be able to establish a healthy cash flow each month. Several people find it useful to set realistic spending limits for each category. Others may be able to free up funds by re-prioritizing their expenses and taking a closer look at their expenditures.

Step 5: Adjust Your Spending

Based on your monthly earnings and expenditures, you may need to adjust your spending to stay within your budget. Cutting out frivolous spending beyond a reasonable amount begins with a realistic assessment of your wants. You should also review your fixed expenses at this time. Saving money on your mortgage can be achieved by getting a better interest rate or adjusting your loan payment schedule. Before you make any changes to your mortgage, be sure to get in touch with me first!

Step 6: Stay on Track

To be able to detect any changes in your spending habits, it is vital that you track your budget on a monthly basis. However, it is also a good idea to conduct an annual review of your overall plan and consider any changes that might need to be made in the overall plan due to an increase in expenses or wages.

If you need further assistance, the Government of Canada has an online budget planner tool that you can use! Here is a link to where you can find it. It is important to remember that a healthy budget is the key to financial freedom and comfort.

MortgagePRO Ltd. is a private mortgage broker firm, based in Calgary Canada, providing mortgage broker services to Canadians since the start of century in Western Canada. We also Private Lender, enable us to provide privately funded mortgages, where we need to, and where applicants do not qualify for traditional lenders guidelines, due to credit, job or age issues. Start with FREE Consultation and or just a short application, but if you need to move fast, complete and submit the long application.