Upon hearing the word BUDGET most people begin to
frown. This is not surprising as budgeting can be an overwhelming
task for some people, but it does not have to be. Preparing a
household budget can be simple and exciting. Do not place added
pressure on yourself by detailing every tiny expense, rather focus
on creating a plan that is reasonable and easy to follow.
The first step to creating a working budget is to make a list of
expenses and categorize them. All of your expenses fall into three
basic categories: Needs, Wants and Savings. The 'needs'
category includes expenses required to survive, such as housing
expenses, groceries, clothing, transportation expenses and medical
expenses, if applicable.
We should all be putting money into 'savings'. Building
an emergency fund and retirement savings, although not enjoyable
now, will benefit you greatly in the future. It is also important
to have a personal short-term financial goal. Whether this is
something big such as saving up for an exciting trip or small such
as purchasing a new iPod – if you have a goal, you will be
more determined to save and you'll have more incentive to stick
with your budgeting plan.
The remainder of your expenses fall into the 'wants'
category. This includes but is not limited to dining out,
entertainment, gifts and discretional insurances.
Once you've listed all of your expenses and categorized same
into these three basic categories, you will need to balance the
budget. Start by determining what your normal monthly take home
income is and how much is left after you've factored in all of
the expenses in your 'needs' category. This is how much
money you have left over to allocate towards your 'wants'
and 'savings' categories. A common rule of thumb for
determining if you are allocating your expenses properly is the
50/30/20 rule. 50% of your income should be spent on your
'Needs', 30% on your 'Wants' and 20% put into
Your budget is now ready to be put into practice!
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Over the past year, we have watched the Canadian dollar drop relative to its U.S. counterpoint impacting Canadian businesses. U.S. goods and services are now more expensive, U.S. sales make a premium and errors when recording foreign exchange transactions can cost you more money.
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