The Federal Budget has just been released, and while this is probably not the most exciting news, it may serve as a timely reminder to take a closer look at your family budget.

As a broker, part of my job is to understand my clients’ spending habits, which can significantly impact their ability to secure a loan. During the course of these discussions, I am often surprised at just how many households have no idea where their money goes. It’s at this point, I suggest setting a budget.

In order for a budget to work, you first must to be clear on why it is needed. Are you drowning in debt, not meeting your bills, or do you simply want to start saving more each month? Whatever the reason, this will serve as your motivation to stick with it, when you think about cheating.

Most successful budgets are based on comparable data. I recommend that you keep track of everything you spend, down to the last cent, for at least one month, preferably three. Then at the end of the month, group your purchased items into various categories. If you have kept an accurate and honest account, you might have to confront some hard truths about where exactly your money goes.

Now that you have a baseline and some factual data, it’s now time to create your first monthly budget. Be sure to keep track of every cent you spend in this first month, to see how accurate your budget was and to refine if required.

From here, set the next month’s budget. Again, keep track of every cent and by the end of this month, you should have an idea of your spending habits and how effective you are at sticking to your budget.

Setting a budget - Step by Step:

Keep track of every single cent you spend for one month.
Group these purchases into various categories (Housing, Utilities, Clothing, Transport, Medical, Insurance, Household Items, Personal, Education, Entertainment, Food / Groceries)
Set your first budget for the next month based on the amounts in each category.
Keep track of every cent you spend during your first budget month to see if your budget is accurate.
Set your next month’s budget and make relevant adjustments and again keep track of every cent you spend.
If at this stage, your budget is still not allowing you to pay all your bills and save the amount you want, your only options are to lower your spending or earn more money!

The good news is that everyone can easily find ways to reduce their spending by following the steps above. If you have a solid reason to start a budget, try my steps for three months and let me know how you go – I’d love to hear your feedback!

Michael DeGeorge