by Hilary Smith
A report released late last year revealed some startling facts: we don’t budget. In fact, more than half of Canadians don’t have a budget, and the negative impact of not planning is felt most by parents between the ages of 35 and 44. This group not only struggles to make ends meet more than others, but also carries more debt, too.
No wonder. What with daycare, sports registrations, school-related expenses, braces, athletic equipment and all the other costs of childrearing, there’s a steady drain on family finances during these prime parenting years.
At the same time, moms often have the responsibility of paying the monthly bills, taking care of the kids and making sure everyone in the family has what they need. In the day-to-day rush, creating and maintaining a budget can easily fall to the wayside. Soccer fees are due? The dance school sent out an email about costumes three weeks ago? Oops. When the numbers aren’t tallied and the expenditures aren’t accounted for, there can be chaos. There can also be a behavior pattern established that prevents your family from achieving financial goals.
Why does budgeting matter?
One of the first things financial planners tell clients is no matter your income, it’s important to budget. If you don’t keep an eye on your spending, a huge salary will be spent just as fast as a small one.
Using a budget will help you stay on top of where money is going. Do you stop and get a fancy coffee on your way to work every morning? Although this may not seem expensive at the time, such daily habits can add up to large monthly expenses. When you use a budget, your financial picture becomes clearer and you’re able to identify wasteful expenditures. If you’ve been saving for a new car or a down payment on a home, creating a monthly budget will help you achieve these goals. You’ll be surprised how much can be saved within just a year thanks to a carefully planned budget.
Budgeting is essential for paying off family debt. When you’re in debt, it’s recommended you pay off as much as you can each month. Without a budget, you have no idea how much you can afford to put toward the balance, so you’re more apt to stick to the minimum payment. As a result, the debt and the money struggle continue.
Monthly budgets prevent you from falling deeper into debt, too, since they allow you to plan for expenses in advance. This is significant, because 90 per cent of Canadians say they have more debt now than they did five years ago, according to Practical Money Skills Canada.
How do you do it?
Budgeting is not something taught in school, so how are you supposed to know how to do it? Luckily, you don’t have to take on money management all on your own. Resources are available that can help make the process easier to handle.
Using a mobile app to make and manage a budget will help you stay up to date as you’re out buying groceries, picking up dry cleaning or shopping for new clothes. Many free apps can help you track spending, stay on a predetermined budget, and see where your money is going through automatic categorization of expenses. Now that most Canadian banks are supported through these apps, you can sync your accounts to stay on top of your money. Here are a few apps to check out:
mint.com: The leader in personal finance, Mint can help you track your spending by automatically pulling in your account information and categorizing your expenses. It has real-time alerts when you’re over budget and can help you quickly and easily visualize where your money is going.
homeselfe.com: Your home deserves a selfie too. This app will take you on a virtual tour around your house and ask you a few questions about your appliances and bills (It only takes five minutes.) After you’re done, a report will tell you what parts are more energy efficient and what spaces need energy upgrades. This will help lower your bills and make your house a greener living space.
moneystrands.com: See at a glance where your money is being spent, set up alerts, and scrutinize a unified view of your finances.
pocketguard.com: As with other apps, this one connects directly to your bank account so you can see transactions and your balance. The app shows you how much money is currently in your “pocket” and how much you’ve spent. At a glance, you can determine your cash flow so you can make smart decisions.
youneedabudget.com: More than a money management app, YouNeedABudget is a system that focuses on four rules to help you keep your income and expenses organized. Beyond budgeting, this is a mindset that will help you improve your relationship with money and spend it wisely.
If you aren’t smartphone savvy, there are options available for desktop computers, too. The Financial Consumer Agency of Canada has a free budget worksheet online with step-by-step instructions to help you plan for everything from hair care and clothing to groceries and childcare.
Once you’ve filled out the worksheet, it may be a good idea to print it and carry it with you through the month. Check on a daily basis to see if you’re staying within the budget boundaries you gave yourself.
Ways to cut back
One simple way to save on monthly expenses is to cut back on energy consumption in your home. Lowering the thermostat by one degree in winter and raising it one degree in summer can make a difference in your monthly bill.
Are you spending too much at the grocery store? Try making a list before you head out to shop. Research shows that people who avoid impulse shopping during trips to the supermarket can save about 23 per cent on grocery bills. While grocery shopping, consider switching from pricier name brands to generic labels. If you’re concerned about the difference in taste or quality, make the switch for certain products only, such as flour and sugar; you’ll never be able to tell the difference.
If you’ve gotten in the habit of going out to dinner as a family, reevaluate how often these trips occur. Twice a week could probably be cut down to once a week or once every other week. Choose to make dinner at home, and you’ll see an instant savings in your budget.
The most important part of budgeting is sticking to it. Hold yourself accountable and stay on top of your finances on a daily basis. You’ll be setting a good example for your kids and, hopefully, setting them up with a college fund at the same time.