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5 Steps to Planning Your Household Budget


It’s easy to accumulate debt when you don’t have a budget to work with. You enter dangerous territory when you can’t visualize your finances because it’s easy to make a purchase on your credit card without thinking about where that money is coming from. Creating a budget is an important piece to a strong financial footing for you and your family. Having a budget will help you manage your money to properly control your spending, pay off debt, or stay out of debt, and save money.


If this is your first time creating a budget know that it takes time, trial, and error. Don't get us wrong, numbers are numbers and they don’t lie. When you lay out all your expenses, you may find there are areas in your life where you need to reign back the spending and the numbers may be surprising. Ultimately, that comes down to you and your goals. If you already have a budget and haven’t looked at it in awhile, maybe it’s time to make some updates.


First, there are some items you’ll need to create your budget:

  • Bank statements
  • Credit card statements
  • Bills
  • Statement of earnings from sources of income (IE: pay stub)
  • Other statements that show money you have earned and money you have spent

Decide if you want your budget to be kept electronically or on good old-fashioned pen and paper. There is no right or wrong choice here, it simply comes down to preference and what you are comfortable with. There are lots of resources out there to help you keep track of your budget, one of our favourites and most reliable is from the Canadian government’s Financial Consumer Agency of Canada. They have worksheets you can print off or replicate for electronic purposes. They also offer an online budget planner tool you can fill in your information online. You may also want to check with your bank, they will have resources for you to use when creating your budget. And now, the dirty work - 5 Steps to Planning Your Household Budget.


It is ideal to have a goal in mind when planning your budget. Do you want to pay off a specific debt or loan first? Are you saving for a trip or big purchase? Are you just looking to set aside money for a rainy day, or needing to ensure all your expenses are covered each month? Whatever your current goal may be, keep that in mind as you build your budget and acknowledge that goal will change as you move forward with your life.

1. List Your Income

Start by listing your monthly income. The salary from your job will probably come to mind first as it should, but list all your income streams. Do you have a side hustle? Any investments? Rental income? Try to collect every source of revenue you can think of here; but the key is that the income you list is reliable income, that is you know what to expect each month. If your side hustle income fluctuates greatly each month, take an average for the budget or leave it out completely. Don’t forget about alimony, child support, etc. If you have a partner contributing to the budget, be sure to include their income(s) here too.

2. List Your Expenses – All of Them

This part can be an eye-opening experience for many – writing down your expenses. Often, we are not aware of how much we are spending and on what, until we write it down and see the dollars add up before our eyes. This section can be broken down into fixed expenses and variable expenses. From there, variable expenses can be broken down to needs and wants (though fixed expenses are typically needs, some fixed expense may be classified as a want). We’ll talk about it all next.


Fixed expenses include, but are not limited to:

  • Mortgage, or rent if you are renting
  • Insurance (property, vehicle, life, etc.)
  • Property taxes
  • Alimony, child support, etc.
  • Phone/internet/cable plans
  • Vehicle payments
  • Debt and/or loan payments, including credit cards
  • Any large purchases you are making monthly payments on
  • Other

Variable expenses can be classified as needs or wants. Properly recognizing these expenses can make a big difference for your budget. The names are pretty self-explanatory but just to be sure: a need is something you need for your day-to-day life. You need to eat and it’s more cost effective to cook than it is to eat out, so groceries are a need. A want is something you like, something for you to enjoy and that can be looked at as a treat, but it is something you can go without. For example, dining out is a treat because you can cook at home. Any form of entertainment or meeting up with friends for drinks is a want. If you are unsure whether an expense is a need or a want, chances are it is likely a want.


Variable need expenses include, but are not limited to:

  • Utilities
  • Groceries
  • Gas
  • Other

As these expenses vary each month, we suggest writing down the maximum amount you want to spend in each area. Your goal is always to spend less than what you allow yourself.


You may hear the term disposable income, that is the money you have left after your fixed expenses and variable need expenses are paid for. That leftover income is what you have to spend on your wants, or save for the future. Some may refer to this as discretionary spending. Variable want expenses may include, but are not limited to:

  • Dining out
  • Grabbing a coffee on the way to work
  • Drinks with friends at the local watering hole
  • Entertainment options (movies, golf, concerts, etc.)
  • Clothing splurges
  • Skin care and hair care splurges
  • Any money you set aside for savings or investments
  • Other

Ultimately, what expense is a need and what is a want comes down to you and your desires. For example, we recognize some will value skin and hair care more than others our question is do you need that $110 face wash or can you go with the $50 bottle for the time being? Do you need thave to go out for after work drinks every Friday or can you have a few at home with your buddies? These are your choices to make but know that what you spend on your wants is where you can make the biggest changes.

3. Calculate Your Net Income

Not to be confused with the net income of your salary, that’s likely to be taken care of by your employer. If you are self-employed then this is a discussion to have with your accountant to ensure you are accounting properly for your income tax deductions. The net income we are talking about here is what you have left when you subtract your expenses from your income in steps two and three (we also referred to this as your disposable income earlier in this blog). Is your net income positive or negative? Positive is a good thing! That means you have money left over that you can put towards savings or pay off some debts faster. If you have a negative amount then you will want to look at your spending more closely.

4. Adjust Your Expenses

Whether your net income from the previous step is positive or negative you may want to consider adjusting your expenses either way, but this is especially true if you had a negative amount.


Negative net income? It’s time to get yoru spending under control. We come back to the need versus want argument here. The easiest area to reduce your expenses is with your discretionary spending; it’s time to buckle down and really separate your wants from your needs. Consider all tactics from purchasing a different, less expensive brand to eliminating the cost altogether. Some of these choices may be difficult but they are necessary.

Don’t forget your need expense categories either, this may be a more challenging area to control your spending but it is doable. Lower your gas spend by biking, walking, carpooling, or using public transit when possible. Control the amount you are spending on groceries by eating healthier dishes that will fill you up longer or give you more energy because you are properly feeding your body the nutrients it needs. Shop out utility providers to see if another company offer better rates.


You can look at your fixed expenses too, is there a cheaper phone, internet, or cable plan? Can you go without cable? Play around with your expenses and see where you can cut back. This may take a few tries before you have some numbers and a lifestyle you are more comfortable with.

5. Track Your Spending

Finally, even though you have a monthly budget you plan to follow to a T, know that unexpected expenses can come up. That’s why it is always a good idea to have some money set aside in case of emergencies, this is especially true if you have kids or pets, but vehicle problems can come out of the blue and can be quite costly. It is important to track, monitor and adjust your spending as needed throughout the month. Mint offers an app and additional resources to help you do just that, from the convenience of your phone. Mint is an extension of Intuit, a company that helps individuals and businesses create, track, and achieve their financial goals. You may be familiar with their products such as TurboTax and QuickBooks. Whatever method you choose, just be sure to track it continuously throughout the month and adjust your budget as needed.


That’s it? Just five steps? Yes, but remember it does take time to gather the documents and sort through your transactions. It will take time to adjust to following a budget and a possible change in your lifestyle. Most importantly, remember to track and monitor your spending throughout each month and adjust accordingly for that month and moving forward. Now that you have the information for creating a budget, let’s get to work and make plans to achieve your financial goals!

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