How to make a personal budget

27 July 2022 by National Bank
Making a Budget

Whether you’re a family, a couple or a student, making a budget allows you to better understand your spending habits and to adjust if necessary. Beyond structuring your finances, a good budget will help you be financially prepared for the unexpected, all while helping you save for goals that are important to you. Here’s how you make a simple and balanced budget in 6 steps. 

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1. Prepare the right way

“To me, the first thing you have to do is find the budgeting tool that’s right for you,” explains Steve McCready, financial planner with National Bank. “There are online calculators, like the ones provided by the government or National Bank. These will make the work easier, as nearly all categories of expenses are already included, and the calculations are done automatically. Otherwise, you can use an Excel workbook and build an annual budget spreadsheet. Some mobile apps are made to allow you to very closely monitor your budget by syncing up automatically with your bank account. In particular, they allow you to create a personalized budget based on your transaction history. The important thing is to adopt the tool you’re most comfortable with.”

Preparing your budget starts with your financial statement in order to get a clear overview of your personal  finances.

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Of course, your advisor is always available to guide you through this process. They can also help explain certain concepts you’re having trouble with or provide you with documentation.

2. Identify all your sources of income

“Write down your monthly net income, meaning your salary after tax deductions, or the actual amount that’s deposited into your bank account. Usually, this amount shouldn’t vary. To calculate it precisely, consult your pay stub and your last income tax statement.”

You may have other sources of income, like tips or commissions, investment income, support payments, child benefits, a pension, bonuses, etc. These amounts appear in the “deposits” column of your bank account, except for cash tips. In this case, plan for an additional entry for this purpose.

3. Enter all your expenses

A good personal budget includes three distinct spending categories.

Fixed expenses are ones that recur every month and don’t vary much. They include:

  • Rent or mortgage
  • Hydro-Québec
  • Telecommunications services
  • Cell phone
  • Transportation (car, gas, monthly passes for public transit)
  • Debt repayment
  • Medication
  • Life and health insurance
  • Disability insurance and general fees

Variable expenses are those that may vary from one month to the next, such as:

  • Groceries
  • Outings and restaurants
  • Entertainment and subscriptions
  • Shopping
  • Vacations
  • Healthcare and beauty (pharmacy, hairdresser, optometrist, dentist and other medical fees)

Infrequent or annual expenses are often underestimated. They should still be planned for in your budget. In order to estimate the total, take a look at your receipts from the previous year. For example, think about:

  • SAAQ vehicle registration fees
  • Annual public transit passes
  • Annual fees to a professional association
  • Car or household repair fees

To calculate your expenses, a credit card statement can be a valuable source of information. You will get a better idea of what happens to your money. For an even more detailed picture, keep your receipts too. That way, you’ll be able to distinguish between costs for food, school supplies, or medication purchased from one or several stores. Don’t forget about small cash purchases. They may seem innocuous, but these recurring purchases have a significant impact on your budget over time. Every $5 paid for a large latte represents hundreds of dollars less in your pocket at the end of the month.

“There’s no harm in overestimating your expenses; this creates a cushion. Be as realistic as possible with the amount you spend. However, I don’t see a problem with rounding out a number; there’s no need to calculate to the penny,” the expert points out.

4. Think about your savings and emergency fund

Of course, there are savings. Depending on your financial situation and your objectives, you should put 10% to 20% of your budget towards savings. “To make a good budget that holds its course, there’s one piece of advice that I like sharing with my clients: pay yourself first. Saving is so important,” McCready insists. “It’s more than just an expense; I consider it an investment. Before putting money towards other expense categories, dedicate an adequate amount to your savings. It’s a way to prioritize your future and ensure better peace of mind.”

If something unexpected should arise, like if you’ve lost your job, then this will throw a wrench into your income, as well as your budget. That’s why it’s important to build an emergency fund. You should set aside the equivalent of three to six months’ worth of expenses rather than income. So, consider dedicating part of your budget towards your emergency fund.

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5. Draw conclusions

Subtract the total of your fixed and variable expenses from your total income. You will come up with your monthly financial result. To draw relevant conclusions, do this over a period of one year. “If you’re at a deficit, meaning if you come up with a negative sum, take a look at which areas you can make cuts to. Are you consistent when it comes to financial management? Are you at a deficit at certain times of the year, like during the holidays, for example? This process will allow you to understand your habits when it comes to money and, most of all, to adjust if necessary.”

6. Follow up diligently

“Make it a habit to update your budget as regularly as possible, whether by using your mobile app or by opening your Excel workbook. Remember to enter your expenses frequently to avoid seeing it as a chore at the end of the month. I also suggest you compare your initial budget to your actual expenses,” explains McCready.

“I suggest that you meet with your advisor once a year so you can review your budget together. If a major event occurs and affects your finances, don’t wait; make an appointment as soon as possible.” This can include losing your job, but it can also encompass having a baby or planning for a personal goal you want to achieve, like taking a yearlong sabbatical to travel the world.

Keep in mind that the goal of a budget is to make corrections that ensure that your total income is greater than your expenses. Your advisor will then be able to guide you to optimize the use of your money, whether to pay off your debts or save for your goals.

What about family budgets?

Having a baby and buying a house, a pool or a second car are family goals that can be better planned for with a family budget. Here are some tricks for specific events to help you avoid being unprepared.


Making a renovation budget could help you save thousands of dollars. First, figure out which renovations could bring you a better return on your investment, like the kitchen (which represents 10% to 15% of the home’s value). Then try to save on everything you can control, like doing the work yourself or choosing less expensive materials.


A wedding can quickly turn into debt that you end up dealing with for years. To avoid nasty surprises, it’s best to start preparing 9 to 12 months before the big day and to make smart choices, especially when it comes to the following aspects: bar service, music, hairdresser, dress, flowers, food and photographer. Because there are always unexpected surprises, plan for a “cushion” equal to 5% to 10% of your total budget.

Having a baby

Having a baby can take up 20% of your family budget. Needless to say, you can plan for this. Other than diapers, there are also expenses before the birth, like furniture, decorations, and maternity clothes. One thing people often forget to add to their budget: an RESP, which is a very beneficial savings tool from a tax perspective for a child’s future studies.


You made it: you’re finally on vacation. Even though you’ve saved up for this long-awaited break, you may have forgotten to include in your budget all the non-essential expenses you’ll make once you’ve reached your destination. Make sure to add an additional amount for restaurants and souvenirs.

How do you make a budget when you’re a student?

If you’re in school, you probably have limited financial resources. Following a budget then becomes a challenge when it comes to covering all your school-related expenses. If your income is insufficient, you could get help from private or government loans and bursary programs, or a line of credit from your financial institution.

Need help making your budget? Contact a National Bank advisor


Legal note: The information that appears in this article is provided for illustration purposes only and are not exhaustive. For advice on your finances and to determine whether the features described in this article are right for you, please speak with your National Bank advisor or, if applicable, a professional (accountant, tax expert, etc.).

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