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Whether you’re single, in a relationship and with or without kids, it’s always essential to make a budget, stick to it and adjust it over time to improve your financial health. This exercise, which may seem unnecessary for some people or too demanding for others, is a must to better understand your expenses and sources of income, adopt good financial habits, and determine and improve your financial leeway. It enables you to prioritize and carry out your short- and medium-term projects, as well as achieve your financial objectives.
It is important to review your budget whenever there’s a significant change in income, expenses or both. Remember to update it at least once a year to take stock of your financial situation and review your plans.
Wondering how to make a budget and what information you need beforehand? Here’s a list of things to keep in mind:
1. Choose your tool.
To do this exercise well, you can use an online calculator or simply a sheet of paper and pencil. In order to make things easier, we provide you with a budget calculator that can help you to better understand and control your expenses.
2. Enter your income and expenses.
Include your net monthly after-tax income, as well as any other sources of income, such as tips, what you earn from self-employment, rental income, investment income, support payments, or others. Also, keep track of all your monthly expenses, which you can sort into these broad categories:
Housing
Transportation
Debt repayment
Insurance
Day-to-day expenses
Other expenses
3. Think about your savings.
Whether it’s for a short- or medium-term project, preparing for retirement or setting up an emergency fund for an unforeseen event, savings should always be part of your monthly budget. Define your goals and their horizon, and allocate a certain amount of your income to savings in order to reach them.
Once you’ve done this, you can determine the most important part of your daily expenses, know where your income is going, reduce non-essential expenses and avoid spending more than you earn. Take as much time as you need to make your budget; it will be good for you in the long run to save more.
Need advice on how to better manage your budget and reach your financial goals? Talk to your Laurentian Bank advisor today.
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