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Creating a personal budget that really works

25 January 2015 by National Bank

Have you ever sat down and made a budget? And, if so, how long did you stick to it?

No need to worry: wanting to follow a budget is already a step in the right direction, because a budget is a very useful and even essential tool.

However, if the budget you build isn’t realistic, it will be very difficult to follow and you may get easily discouraged.

For those ready to make the move, here are tips for creating a realistic budget that will help you to take charge of your money.

Preparing a budget

Making a budget is actually very simple: just enter your income in one column and expenses in another.

Be sure to include all of your expenses, ensuring that nothing is overlooked, because a budget that doesn’t accurately reflect reality isn’t useful.

Be sure to register all of your expenses, including the smallest ones, which can easily become large when combined.

The first step is to gather all your bills. For everyday expenses, try writing down all of your expenses in a given month.

Also make note of all of your debts and monthly or annual payments. For major expenses, try using an online tool, such as the one offered on the National Bank website.

“You need to be realistic, even if sometimes we’re afraid to see what we spend,” emphasizes Samya Namir, Consultant, Transaction Services and Small Business at the National Bank branch located at the corner of Saint-Hubert and Beaubien in Montreal.

Once all of the information is in hand, you’re ready to start making your budget!

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Budgeting is a question of making choices

When calculating your income and expenses, it may be that you wind up with a surplus. Well done! Use that money to start paying off your debts and take the opportunity to save for retirement or unforeseen circumstances.

However, if your budget shows a deficit, then it’s time to make choices and to re-evaluate your priorities.

“We often don’t want to deprive ourselves of anything,” adds Samya Namir. “We want to buy things that we just don’t have the means to buy.”

If you don’t want to spend your life stressing over debt, then you need to choose the things that are most important to you.

Budgeting isn’t always a piece of cake, but it’s a feasible and highly desirable endeavour!

Adapting your budget to reality

Given that life is full of surprises, Ms. Namir stresses that you should review your budget regularly to ensure that you remain on the right path. Remember, your income and expenses may change over time, as well as your priorities or situation. For instance, the arrival of a new child, a divorce, a job loss or a new project are all good reasons to re-evaluate your budget. If you don’t keep an eye on things, you could quickly lose control of your finances.

That being said, it’s easy to get discouraged and to give up. Therefore, in order to ensure that you stick to your budget, it must be realistic from the outset, be regularly reviewed and revised and you need to be organized.

“You have to believe and be disciplined,” says Samya Namir. “You need to anticipate and be organized.”

Ms. Namir adds that, if you don’t have a surplus, then your budget can help you to work towards having one. Placing limits on the amount of money that you allow yourself to spend or withdraw from your account is one good example of how to do that.

If you need help, don’t hesitate to consult with your bank or financial advisor, or to take full advantage of available resources on the Internet, including this downloadable budget calculator from the federal government.

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