Last Wednesday, I published my usual monthly budget post. As I mentioned in How I Write My Monthly Budgets, I can write one of those budgets in 20 minutes or less. And, while part of that comes from years of tracking my spending, the basics of how each monthly budget needs to be written will always be the same.
When Sara commented on the festive colours I’d chosen for my latest budget, I realized two things: 1) she’s not the first person to comment on the fact that I change my budget’s colours each month, and 2) maybe one of the people who has commented would want to use my budget themselves. With a resounding “yes!” from commenters on my Facebook page, I decided to update my October 2013 Budget & Goals post with a link to a blank copy of my budget template.
Now, I’m the first person to admit that this spreadsheet is about as basic as it gets but, if you’re a first-time budgeter, I think it’s a great place to start. My budgets are constantly changing, based on my needs and expenses, and yours will too. The minute you open this spreadsheet, it’s yours to do whatever you want with. Add categories, delete categories, move things around… make it work for you! But if you need a little help getting numbers into it, here’s where I’d start:
Your Net Income (Take Home Pay)
Before you can even think about writing a monthly budget, you need to know how much money you’ll be bringing home. Depending on your income level, employment situation, etc., calculating how much you earn in one month isn’t always easy. I consider myself lucky, because I’ve been earning an annual salary since I was 22, so calculating my monthly income has always been easy. When I was getting paid bi-weekly, I multiplied my take home pay by 26 (# of paycheques I would get in one year) and divided the total by 12 (calendar months). Now that I’m paid twice/month, I can simply multiply my take home pay by 2.
If you’ve been working a couple of jobs, earning tips, etc. then you may need to come up with an average or estimate. To do that, you could look back at your bank records, add up how much you’ve brought home over the last 3 months and divide the total by 3 for an average. You may not have a record of all of the tips you’ve earned, but one thing I will add is that you should never rely on your side hustle or tip money to pay for your fixed expenses. What if the money stops coming next month? Your paycheque should cover your fixed expenses. Side jobs/tips are bonus money that can help with your debt repayment/savings goals/the rest.
Now, with my template, I don’t write down my monthly income anywhere. As I’ve said before, I don’t practice zero-based budgeting, so I simply try to have my total budgeted amount at the bottom add up to a little less than what I actually take home. Let’s start adding some numbers and see if that works for you too.
Your Fixed Expenses
Your fixed expenses are the things you have to pay every month, and usually cost the same amount each month. If you look at my October budget, my fixed expenses include: rent, car insurance and health care. I could potentially even include Internet too, since I know a $30-something bill is going to come each month. Put all of your own fixed expense amounts into your budget first, because you know these are things you have to pay for each and every month. If the total budgeted amount at the bottom is already getting close to your monthly take home pay, you either need to find a way to lower your fixed expenses (move to pay cheaper rent, cut something out, etc.) or make more money.
Your Debt Repayment
Onto debt repayment. I mention debt repayment before savings because, if any of you are like me, you may have some fixed debt repayments to make each month. For example, I was paying $117.42 bi-weekly on a car loan for a little over 3 years. Because I was making bi-weekly payments, there were 2 months each year where I had to make 3 payments instead of 2; the same was true of another loan I was making bi-weekly payments on. Keeping my eyes on my calendar (where I wrote down all of the payment amounts that were coming out on each day), as I made each monthly budget, was extremely important when I had fixed debt repayments to make.
If you don’t have any fixed debt repayments to make, you may still have a line of credit you’re trying to pay down or a balance on your credit card where you’d like to see $0. I won’t say how much of your budget you should allocate for debt repayment, because I had months where it was 15% and others where it was 55%, but you should create a plan to pay it off for good. (And making only the minimum payment won’t get you anywhere!) On a separate piece of paper, write down how much debt you have and how many months you’d like to have it paid off by. Divide the total debt by the number of months and you’ll have your new minimum payment. Add it to the budget.
Your Savings Goals
Onto savings – and this is still a new one for me! I don’t know about you but I’ve always heard that I should be saving 10% of my income. In what type of account, exactly? And for what purpose? That’s where personal finance gets personal. Currently, I’m trying to save 10% of my take home pay in my RRSPs. Am I happy with the account they are in? Not really, but I’m actively researching new options (hence one of the reasons I want to take CSC!). In the meantime, however, I’m still going to save that 10% for retirement, while I work on a few other savings goals.
The reason savings is still such a foreign concept to me is because, quite frankly, I used to suck at it. Hello, I once had $28,000 of debt with only a few thousand dollars in an RRSP and absolutely nothing in any other savings accounts. The only saving I did was at the store (although, when you put a sale item on a credit card that you can’t pay off each month, it’s no longer really a sale item). When I was busy focusing on debt repayment, however, I did start adding savings to my budget. First, 5% went into an Emergency Fund – then sometimes 7% or more. Pick a realistic goal that would make you feel good and add it to your budget.
Earlier this week, I preached the importance of tracking your spending – and I will forever stand by that! But tracking your spending doesn’t change how much money you bring home, what your fixed expenses are, how much money you owe or how much you’d ideally like to save. What it does show you, however, is how much you spend on “the rest”. For me, “the rest” includes groceries, takeout food and coffee, gas, shopping money, entertainment and small amounts of cash spent on who knows what; these are the amounts that are hard to just come up with estimates for and throw into a budget for the first time.
If you haven’t been tracking your spending already but you’d like to write a monthly budget today, you can still go back to the last few months of bank statements and add up what you’ve been spending to come up with some estimates. You don’t need to use the same categories as I do, so long as you come up with new categories that don’t fall under any of the other sections (fixed expenses, debt or savings). At the end of the month, if you find that you’ve gone over budget in one or more of “the rest” categories, don’t beat yourself up about it. Just adjust your next month’s budget and see how you do.
Have I missed anything!? Do you still have questions? Some of this just feels so second nature now that I’m sure I’ve forgotten a key point or some little piece of advice that helped me, so ask away. Again, I will say that this spreadsheet is very basic – and it’s just a monthly budget, not an annual budget, or one that tracks your spending or could offer any projections. However, if you’ve never budgeted before, it could be a great way to start seeing how a budget can work for you.
Remember that the point of a budget isn’t to restrict your spending; it’s to help you do the most you can with the amount of money you have.