How to Start Budgeting

After spending my summer working full time, moving out of my parents’ house, and buying my first car, I’ve had to quickly learn how to handle my money. Here are some tips and tricks that really helped me out.

Find out what you’re working with

If you started working in high school it is likely you didn’t keep a very close eye on how much you had in your bank accounts, as long as there was something. When you have bills to pay or are thinking of making a big purchase you need to know exactly what is coming in on a monthly basis in order to know how much you can afford. I found doing this the old-fashioned way was the most productive. Grab a pen and notepad and write down all of your consistent deposits for an entire month. This means an amount you can count on being deposited into your account such as a paycheck or money you get from parents on a monthly basis. Add all of this up so you have a specific number you know you are working with.

What you owe If you have multiple bills to pay it can get confusing trying to keep track of them all. It is easy to underestimate how much you pay a month if your payments aren’t very large- but they do add up. Write down your phone bill, rent, insurance, car payment, your morning coffee, gym membership, groceries, etc. and then add them up. Now subtract that number from your monthly income.

The difference

What you have left over after your bills should be enough to go out a few times a month, whether that’s to dinner with friends, a movie, or date night. You’re working hard for your money, you should be able to have a reasonable amount of fun with it. Decide what that looks like for you and put that money aside.

Save, save, save

You should still have something left over after all of that. No one wants to live paycheck to paycheck. It’s important to have savings in case of an emergency but you also need savings to buy a vehicle, move out, go on vacation, or buy new tech. I got an 'interest savings account' with Simplii Financial. It has a high interest rate so the more money I put into it the more money I make off of it. Having my savings in a completely different account is what really changed the game for me. When I had it in the ‘savings’ section of my debit card I found myself constantly transferring it to my chequing or just using my savings at checkout. Having it on a different card, through a different bank, made it as if the money was not an option. I don’t carry that card on me either- that way I can’t reach for it.

Ask for help

There is a good chance you know someone you trust who is good with money. For me, it’s my mom. I had her come with me to get my first credit card and buy my first car. It ensured that I wasn’t making a bad investment in a situation I didn’t have experience with. The first couple of months that I budgeted I laid everything out on paper myself, and then went over it with her to make sure I wasn’t forgetting anything. With something as important as money it’s crucial to get advice from trustworthy people who have experience.

Set some credit card rules

Building credit is necessary. We aren’t taught much about it in school so it’s important to educate yourself. Here’s a quick video to get you started:

Having a credit card can bring on some bad habits, so it is important to set some rules for yourself. I have one major rule: do not buy anything on your credit card unless you have the money in your chequing account ready to be transferred over immediately. This stops me from spending money I do not have and getting myself into debt. I buy almost everything on my credit card because I collect points for every dollar I spend. My points can be redeemed for money to help pay off my credit card or used to get a gas card.

If I use my credit card, at the end of the day I log onto my online banking and pay off the credit card. While paying it off before my statement comes out does not improve my credit any more than paying it at the end of the month does, it stops me from owing large amounts at one time. It’s also good to keep your amount owed on a credit card to under 30%.

Be stricter with your spending

When budgeting take a look at what you have spent your money on in the past month, then add up all the things you didn’t need. Now multiply that by twelve so you can see how much money you are wasting a year. Try to cut back some of your ‘needs’ as well. You can do this by switching to a cheaper phone plan or gym membership. Even little things help, such as buying in bulk, or only getting coffee every other morning. Every dollar counts!

Whether your income is from a job, parents, or the government, it is important to keep track of what and how you are spending. Thinking about your future can be scary. By making good financial decisions at a young age you are setting yourself up for less financial stress in the future. Use online banking to stay on top of your finances and to be sure you know what is in your account.