Are you still with me?

Amazing! So glad you made it this far! Are you ready to continue on the steps to create your budget and help you reach those financial goals you just set for yourself?

Here it is, the part you’ve been waiting for:

Making A Budget

Creating your budget, or your spending plan is going to be really simple now that you have done all the leg work categorizing your spending. 

Basic Budget Formula

Basic calculations make up a budget, take your income and subtract expenses, spending & savings. With the zero based budget method we learned earlier, the result of that equation should be zero. 

By Hand vs Digital Budgeting

Once again, you can choose whether you want to work on your budget by hand or complete it digitally.  

Here is where I can make the process much easier for you. Check out the Canadian Budget Planner which includes the Budget Template, and Spending Categories & Tracker and more!

If you prefer to work digitally, check out the Master your Finances Digital Bundle which includes a Zero Based Budget template, Net Worth Tracker, and bonus Debt Payoff Spreadsheets. 

Making a Budget Monthly vs By Paycheck

Another personal choice is to decide between budgeting monthly or by paycheck. How often you get paid may be a deciding factor. In Canada, I would say the majority of people get paid bi-weekly, but you may have an inconsistent income, or you maybe get paid monthly like me. 

You can try both ways and decide what you like – or even do both. Create one overall monthly budget, and then plan out each pay cycle with its own budget.  You do you! 

Create your spending plan

YES! Let’s get to it. 

This is a first draft attempt – so don’t be too critical, just start writing, we will revise after this. 

If you have one of my above budgeting bundles, the budget skeleton is already there for you. If you want to make your own here is the general format you want to follow. 

At the top of the page, record your expected income.

Under the income section then comes your expenses.

We are going to practice paying ourselves first. That means before you go spending anything, you have already set aside money for your savings and investments. 

Write down  your contributions to your savings goals (which you determined the monthly costs for in the Free Financial Goal Planner you filled out). Then list out all your expected bills for the month, next to the amount, add the date the bill is due.  Include here any minimum debt payments required each month.

For any bills that are variable costs (a different amount each month) use your estimates from your 3-month spending review (you know, the one we completed earlier), to put down an average cost. 

Below that go the spending categories you already determined up above as well as their estimated average spend. 

Now to calculate, subtract every item from your total income. 

Congrats, you completed your first draft of your budget. 

Are you spending less than you make?

If the above calculation of all of your expenses and planned spending subtracted from your expected income resulted in a negative number – you need to do some adjusting. 

Spending less than you make is the key habit to help you get out of debt, and have enough money not only to spend on the things that are important to you but to have enough to save for the future and invest as well! 

Are you a little over? or way over? 

If you are just a little over the budget (spending more than you make). Small tweaks can help you to refocus your spending habits on what brings you joy, and cut back on the mindless spending that adds no value to you. 

If you are way over budget, evaluate what has caused this.  Go section by section to review each of the following:

• Financial goals and monthly contributions toward them
• Monthly bills and services in use
• Debt repayment amounts (Learn how to get debt free faster)
• Spending categories

Where do you see room for change? Can you negotiate a monthly bill or lower an interest rate? Can you cut out or cut back on a service that is not essential. Can you reduce your spending each month in one or two categories, or eliminate a category altogether?  This article can help you drill down on some ways to save. 

Or alternatively – what are the ways you could make a bit more money each month? This could be as small as selling something on facebook marketplace, or as big as changing jobs to a higher-paying one. 

Whatever it is – now that you have all this data, and knowledge about your spending and financial position – it will be easier for you to make this change. 

Get your numbers right

You want to tweak the numbers in the categories that you have control over in the budget until your balance equals zero – you have given every dollar a job. 

As I mentioned before – this doesn’t mean you have to spend spend spend until there is nothing left.

A great tool in the budget is the Buffer or miscellaneous category.  Budgets are built by working on estimations, so there is always a chance we over or under-estimate our budget. When you overestimate, a buffer is there to protect you.  This could mean adding a $100 Buffer line to your budget, for example.

If you are well under your budget – this means you can divert more of your income to your financial goals, through sinking funds or investments. 

Rejig the budget category amounts until it the balance is zero, and you are ready to go!

Track Your Spending

Now that you have your budget, and your best estimates of how much you think you are going to spend, surprise surprise, you actually need to track what you spend.

Yes, every dollar.

Yes on your debit, credit, and cash use.

And yes – at least for a few months.

It doesn’t have to be a forever thing – but it is a fantastic exercise to really understand your money habits and make sure you are on track toward the goals you set for yourself. 

The Canadian Budget Planner makes it super simple to track your spending and stick to your budget, so check it out!

Why it makes sense to start on paper

There are all sorts of apps for budgeting, and I’ve tried them all. It makes sense to begin your budget on paper as when we write something out by hand – there is something in our brain that makes it stickier. We pay more attention and are able to remember more when we have taken the time to write it out by hand. 

So yes, you can download your digital transaction records from your bank or credit card. But I strongly urge you to take just a few minutes a day at the end of the day – and write down anything you spent that day, as well as assign it to one of your categories. 

The Canadian Budget Planner includes spending tracker sheets – you can also use plan paper or your favourite notebook. 

Close Out Your Budget and Calculate Category Spend 

OK! You have diligently tracked all your spending and you have reached the end of your first budgeting month.

To close out your budget you are going to compare what you budgeted with what you spent. Add up all the spending by category for the month. 

The Budget sheet in the Canadian Budget Planner has a column included for you to add up what was spent and compare it to what was budgeted.

If you are budgeting by month rather than by pay period (and you get paid bi-weekly), I actually recommend you do this at the end of pay period 1 and pay period 2 as well so you can see how you are doing. it will show you how much of your monthly budget is still left to use – and you can adjust the next 2 weeks accordingly.

Review and Revise Budget For Next Month.

Each month you should be looking back on what happened in the previous month and how you did compared with how you planned out your spending.  

A budget should never be static. It should be adjustable and change based on your experiences, and as you improve your relationship to your money.

After you reviewed your performance, you are ready to set your budget for the next period and start again. 

If you went over budget, its not a failure, its a learning opportunity. So don’t let any small hiccups along the way derail your process. 

You are practicing in order to improve, not to be perfect. You want to be better this month than last, but holding yourself to perfection standards will not help in the journey you are on. Give yourself some grace, and know that each time you try, you are getting a little bit better!

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Find more content like this in the Budgeting section of the website!