Saving and Spending Money

Based on today’s economy it is very challenging to keep up with bills, food and the basic cost of living. If it’s difficult to keep up with bills, how can you set aside money for your savings?

The advice I’ve been giving clients is to learn how to budget. Budgeting will help you prioritize what you really need compared to what you want. This will help you achieve your saving goals.

Start with a budget

A budget gives you a visual of your monthly income, monthly expenses, and money left over after your expenses. Using a budget can help you plan how much you need to save on a monthly basis.

Most people don’t bother using a budget to plan their monthly spending or saving.  I come across many people on a daily basis that feels crippled by debt. Some people are in debt because of poor spending habits, while others sink into debt because of the higher cost of living.  Whether you are in debt because of your spending choices or in debt because of a poor economic situation, keeping a budget will help you get out of debt faster or prevent you from getting into debt.

 You generally want to begin your budget at the very beginning of a month. Keep the receipts of all your expenditures in the month so when the end of the month rolls around you can add up all your purchases and figure how much you spent and the things that you spent money on.

Budgeting Tips

Below is some handy advice that I like to give my clients about setting up a monthly budget:

•  Your household income

Calculate your monthly household income. Don’t forget to include child tax benefits, interest income etc. This is the actual amount that goes into your chequing account on a monthly basis

•  Manage and prioritize your monthly expenses

This is a good time to take a look at the receipts that you have kept in the month. How much did you spend on essentials like food, shelter, electricity and many other things that are necessary for your survival? Now think about how much you spent on the things that aren’t necessary for survival, luxuries, such as a new pair of sunglasses, a fancy dinner, daily coffee, junk foods, and other similar comforts. For an accurate amount, I advise that you take 3 of your monthly expenses and average it out. If you are someone who is fully aware of their basic needs, then one month of expenses should be fine for your budgeting purposes.

•  Subtract monthly expenses from your monthly net income

If you have money left after the subtraction, then you will be able to plan for long-term savings and some emergency funds. But beware, if you have a negative number, this means that you are spending more than you’re currently earning. If you find yourself in a situation where you’re spending more than you’re earning, it might be a good time to look at the receipts that you have been collecting and remove the things that you can do without.  Be warned, if you decide to get an additional job to help cover some expenses, as this might not always work. It’s not about how much you make, but about how much you spend.

Once you have a monthly budget in place and you know what your expenditures are, you can now work on your monthly savings plan. Most people save money for retirement, emergency funds, vacation funds, etc. 

Whatever your savings goals are, these tricks seem to always help out my clients:

         I.       Pay yourself first:  Based on my experience, the best way to save is to have a preauthorized deposit from your payroll go into a savings account or investment. If your savings goal is for retirement, you might want to look into diversifying your portfolio by talking to mutual fund specialist or a financial advisor. If your savings goal is for an emergency, I advise my clients to put the funds in a regular savings account or in a TFSA where it is easily accessible.

I I.   Start by saving $25-$50 monthly. I know that most mutual fund accounts will accept a preauthorized deposit of as little as $25 bi-weekly or monthly when you open the account.

Please keep in mind that it is advisable that you spend 30% of your income on shelter, another 30% on your loans and miscellaneous expenses and 10-20% on your monthly saving but not less than 10% on savings. I want to assure you that the 10% savings rule is achievable.

 If you have challenges saving or feeling overwhelmed with credit card payments. It might be a good time to contact me.  I have helped a lot of clients pay down debts, buy their first home and save for raining days. I can help you too.

Leave a comment to let me know if this information was helpful or let me know the topics that you will like to read about.

Feel free to email me directly at margmortgages@gmail.com or call 780 901 8060 with all your personal finance questions.