How to Budget

Creating a budget you can live comfortable on isn't as difficult as you may think. The important thing to remember when planning and creating your budget is to always leave enough money to live comfortable on today. While it's great to get out of debt and save for tomorrow, you should not feel like you are unable to enjoy your life now.

Many people feel daunted when tasked with creating a workable budget; but it's easier than you think. And living on a budget is easier and less restrictive than you'd imagine. As a matter of fact, sticking to your budget while watching your debt decrease and your savings grow is an incredibly satisfying feeling—not to mention one that removes a lot of the stress on money management from your life.

Here are a few simple tips for to keep in mind while planning—and staying on—you budget:

  • Know your goals and plan for them using your savings account
  • Small changes can have big impact over time
  • Think twice about impulse purchases
  • Write it all down—categorize fixed versus variable expenses

Once you have given some thought to and started on these four points, it's time to put your plan into action to achieve your savings goal, i.e paying up your debt,  down payment for first home, etc. Here are some helpful ways to tailor a budget to your lifestyle and stick with it:

Using Your Budget

Once you know how much money you're spending every month, it's time to develop and follow a budget to save money (see our sample budget below for an idea of what they're supposed to look like). Budgets have three columns and in some ways look a lot like the worksheet (also known as a budget worksheet) in which you recorded all your financial information.

Monthly Amount: This is the column that represents how much you expect to spend. You choose the amounts to reflect what you think is important - keeping in mind your long-term financial goals.

Actual Amount: This column tells you how much you actually spent this month. It includes living expenses(monthly bills), car payment, mortgage payment, student loan payment or other debt payments you have.

Difference: This is the difference between the planned amount and the amount actually spent.

If you've spent more than you wanted one month, don't panic. Now that you have a good understanding of your money situation and where it's going, you can get creative and make informed decisions. Spent too much on clothes in May? Scale back a little in September. Too much take-out? Buy or make a few pre-made dinners or brown bag your lunches to offset the costs. Pat your back if you have left over and spent less than your budget. You can contribute that extra money to your bank account based on your goal.

Note: You might decide that developing a budget that follows your pay period is easier. In that case, you might decide to develop a bi-weekly budget that help you save money efficiently. It's important to remember to choose a budgeting plan that works for you.

Finding practical ways to cut expenses

There are always areas to scale back and cut down your monthly expenses that eventually become habit. We have collected some common sense tips from a variety of sources and listed them below. These are general ideas and may not reflect your specific situation. However, they are provided as simple suggestions for shaving or finding extra money that may help out with your personal budget:

Ways to save

  • Bring your lunch one extra day a week
  • Share magazines and newspapers with coworkers and friends
  • Use the Internet for news and research
  • Have your morning coffee and muffin at home
  • Use a list when grocery shopping
  • Get a long-distance telephone package (or use e-mail instead)
  • Take a look at your cell phone bills. Are you really using up all those minutes? Can you switch to a better plan?
  • Accelerate your mortgage payments with extra payments to the principle
  • Talk to your tax consultant and see if you can save more on taxes and increase your take-home pay 
  • Paying up your credit card first to save on interest charges 


  • Revisit your insurance—can you consolidate your home and auto insurance into a better plan?
  • Consolidate your borrowing at a better overall rate
  • Check your bank statements to see if an all-inclusive monthly fee is for you
  • Save stamps by paying your bills online, by phone or at an ATM
  • Use public transportation more often or carpool
  • Shut off the lights when you leave a room
  • Save all your loose change
  • Turn down your air conditioning by one degree
  • Check your mail for coupons and specials at your grocery store (do the same for dining out)
  • Revisit your car loan and check if there is a possibility to increase car payments and save interest

If you are interested in more ideas or budgeting tips, simply get online and use your favorite search engine to look up ways to save (hint: use keyword searches like "budget tips" or "saving money") or you can also take help of budgeting apps or budgeting tools to take full charge of your personal finances.

Again, the points above may or may not be applicable to your situation. Just remember that keeping an accurate record of your expenses puts you in the best position to effectively manage your budget and track your spending habits, in case you are overspending.

How to plan for budget busters

There are some unexpected expenses that sneak up on you and can become a large part of your monthly income, but if you have a monthly budget and know to look ahead, few of these expenses will be a surprise when they finally happen. Think emergency fund with a twist.

Most financial experts tell us to develop a traditional emergency fund, money often stored in a money market account or your bank's high interest savings account. This ensures you can access it easily, but the money still accumulates some interest. This fund doesn't always cover expenses if you feel the emergency is unexpected and the price is high, however.

A planned emergency 

It is always best to anticipate early when planning for an emergency. How? Pay yourself first and pay yourself often. If you were to put $50 or a small percentage of your income in an easily accessible place every month, the money adds up and before you know it, you have money for the unexpected.

The beauty of the planned emergency fund, however, is that few emergencies are actually surprises. Suppose you know your house will need a new roof in five years. Determine how much you need to save, then put money aside on a regular basis to reach that goal.

Still retain a traditional emergency fund for true emergencies, but don't keep all your money there.

It also helps to include a category in your budget called "repairs and maintenance" or "future dental" or anything else you feel may become an issue years down the road. Remember to write them down, estimate the cost, and plan to save for them.

Peace of mind

Budgeting is a fundamental part of taking control of your present and future finances. By knowing exactly how much money you hold to save and spend, you are in a much better position to determine where that money needs to go—and how much. The same kind of logic also applies to your retirement savings.

Now that we've given you an idea about how to set up a budget and how to follow it, the next step is up to you. Pay yourself first, use practical ways to cut your expenses, and learn how to anticipate expenses and emergencies. And remember to write down what you spend. Your long-term financial strategy will be better for it.

Sample Budget

If you would like to take immediate action with your budget and plan your living expenses, a great idea is to pay yourself first before spending money with a Pre-Authorized Contribution. Contact your local Scotiabank branch to set up a Pre-Authorized Contribution today.