Budget Crunch
Life costs money. But living the life of your dreams may be easier than you think. Jack Hayre, branch manager at CIBC’s Fraser Street location in Vancouver, offers these simple steps to managing your money.
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- How much money do you make? First, take stock of your monthly income, preferably over a 90-day period. Only include definite sources, like your pay, rent from a tenant, spousal support or a commission or dividend. This is what you have to spend each month.
- How much do you spend? Add up your expenses: housing costs, cable, hydro, telephone, loans, credit cards, car payment, food, clothing, entertainment, contributions to RRSPs, etc. This is what you’re actually spending each month.
- Balancing your budget. If you’re spending more money than you’re making, it’s time to cut costs. Options range from bringing your lunch to work to refinancing your mortgage. More drastic options include moving to a neighbourhood where rents are cheaper or changing jobs. Look at the higher dollar items first and work your way downward.
- What to spend, where. If you find you’re on budget, or even spending less than you make, you’re on the right track. But are you spending reasonable amounts of money on your various expenses? Think carefully about the percentage of your gross income you should allocate to the different areas of your budget.
- Set your goals. You now have to determine your financial goals. You may want to buy a home or a car, or save for retirement. “Pay yourself first,” says Hayre. Take 10 per cent off the top and put it away. Saving for emergency expenses – like dental work or a car repair – is also a must. You don’t want to go into debt because life caught you off guard.
- The bonus. A Christmas bonus or an inheritance can be a wonderful windfall, but resist the urge to splurge. Make a mini-budget with it as well. First, put as much as possible toward debts that don’t offer tax breaks. Next, put some funds toward your RRSP, both for the current year and the year ahead. And finally, any additional money can go to a savings account or your emergency stash.
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