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Creating a personal budget that really works

06 May 2019 by National Bank
Personal Budget

Creating a budget is already a step in the right direction, but if your budget doesn’t make sense for your needs, you could get discouraged quickly. Here’s how you make a realistic budget that will help you regain control of your finances.

How to make a personal budget

Creating a budget is simple: in one column, write down your monthly income; in the other, write down your expenses over the same span of time. Don’t leave anything out—this will ensure your budget accurately reflects your financial situation.

In the income column, you should obviously write down your pay, but consider other sources of income as well: tips or commissions, investment income, alimony, child benefits, pensions, bonuses, etc. These amounts can be found under the “deposits” column of your bank statement, except for cash tips.

Part of your expenses are also written on your bank statement, in the “withdrawals” column: payments for your rent or mortgage loan, bill payments, etc. Your credit card statement is another valuable source of information. It will give you a better idea of where your money is going.

For an even more detailed picture of your finances, hold on to your receipts. That way, you can separate the cost for food, school supplies or medications that you purchase in one or more stores.

Don’t forget about small purchases paid in cash. Although they may seem insignificant, these recurring expenses have a substantial impact on your budget over time. Grabbing a $5 latte on your way to work every morning could add up to hundreds of dollars in expenses at the end of every month.

If this seems like an insurmountable task, get help from a budget calculator or take advantage of available online resources.

A personal budget is generally calculated for one month, but it’s a good idea to repeat the process for a few months or even over year. That way, you will get a more accurate picture of your financial situation.

After writing out your budget, it’s time to evaluate your expenses, as this is the column that is easiest to change in the short term.

The goal is to make adjustments that will ensure your total income exceeds your total spending.

A financial advisor could then help you determine the best use of this surplus, whether to pay off your debts or save for future goals.

That being said, to ensure you stick to your budget, it’s best to consult it regularly. Many online tools, such as those that categorize your expenses, can help you stay on top of your finances and are synched with your bank accounts to offer you a real-time view of your financial situation and expenses.

What about a family budget?

Managing a budget alone has its challenges. Imagine doing it for two! Several issues could come up. As a couple, you must listen to each other when it comes to mandatory fixed expenses and creating a joint account to manage them.

However, make sure you add a little wiggle room to treat yourself… and don’t include these expenses in the joint account!

Having a baby or purchasing a home, a pool or a second car are goals that should be planned together and can be better managed with a family budget.

General maintenance is one of the new expenses you’ll need to consider when purchasing property. Normally, you should budget around 1% of the total value of the home for this type of work (sweeping the chimney, repairing plumbing, etc.).

How to plan a budget when you’re a student

If you’re a student, you probably have limited financial resources. It’s therefore a major challenge to cover all your student-related expenses, such as books and tuition, while still following a budget. If your income is insufficient, consider getting support from private or government loan and bursary programs or a student line of credit from your financial institution.

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Important life events

Life is full of surprises. Here are some tips for common situations that will keep you from being caught off guard.


Creating a renovation budget could save you thousands of dollars. First, determine which renovations could give you a better return on your investment, such as the kitchen (which represents 10 to 15% of the home’s value). Next, try to find a way to save on things that are within your control, like doing some of the work yourself or opting for less expensive materials.


A wedding can lead you to quickly accumulate debt you’ll be paying off for years to come. To avoid unpleasant surprises, it’s best to spend the 9 to 12 months before the Big Day making smart choices, particularly concerning the following elements: bar service, music, hair, dress, flowers, food, and photography. And because you should always expect the unexpected, plan a cushion of 5 to 10% of your total budget.


A new baby can take up to 20% of the family budget. Needless to say, you’ll need to do some planning. In addition to the cost of diapers, which averages more than $800 a year, there are other expenses to consider before the birth, like furniture, decoration and maternity clothes. Something that’s often left out of the budget is the RESP, a significant savings tool that’s fiscally beneficial. 


You’ve made it: you’re on vacation, lying on a sandy beach. Even if you saved to treat yourself to this moment of relaxation, you may realize once you’ve arrived that you forgot to include non-essential expenses in your budget. Take care to include additional amounts for things such as restaurants and souvenirs.

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