The 'how to's' of Budgeting

What is Budgeting?

Many people are intimidated by the thought of budgeting because they think it is much more difficult than it actually is. When you are practicing budgeting or trying to do budgeting all your actually doing is:

• looking at "what money is coming in" at a given period of time and
• "what money is going out" at a given period of time.
• the period of time can be day to day, week to week, month to month, year to year or any combination in between.

When you're trying to determine what money is coming in take into consideration all types of income:

• income from working full time or part time
• Ontario Works, GST, Child Tax Benefit,
• rental income, 
• investment income,
• pension income such as CPP, OAS, GIS (Guaranteed Income Supplement)
• disability income such as WSIB, ODSP or any form of income replacement from an insurance company. Most of these types of income are taxable with the exception of WSIB and some forms of income replacement paid by insurance companies for disability or illness.

When you're trying to determine "what money is going out" you need to track expenses this process can be a little more intense.

There are several different kinds of expenses to consider. Some of the expenses we incur we're not even aware of. We kind of do it without actually thinking about it.  The day to day expenses are the most difficult to get a handle on.

First, you have to figure out how much pocket money you actually spend on a daily basis. There are so many things to consider as you go through your day.

Here's an example:  

"a typical day" in the life of a working mom or dad (which most of us can identify with):

• driving to work, mom stops off at the drive through to pick up coffee on her to way to work,
• then she stops by the gas station to get gas, while she's in paying for her gas she buys a lottery ticket and a package of gum.

Before arriving at work:

Mom has already spent approximately $75.00. Mom will only have to fill up at the gas station once a week, but lets look at the cost of the coffee or cappuccino she purchases everyday on her way to work:

• Average $4.00 per day times 7 days a week= $28.00 per week
• $28.00 per week times 4 weeks a month= $112 a month
• $112 per month times 12 months in a year = $1344.00 a year.

Even if you only spend $2.00 per day it works out to $56 per month and $672 per year

Arriving at work:

• when mom gets to work its dress down day -- cost $2.00
• there's a fundraiser -- cost for flowers is $5.00
• lunch time costs can range from $5 to $15 per day depending on where you have lunch.

After work:

• Mom takes the kids to karate class paid for monthly
• after class takes children out for dinner approximate cost $30

At the end of the day Mom or Dad has spent $75 +$2+$5+$10+$30= approximately $122 for the day. 

Mom hasn't paid mortgage or rent, purchased groceries, paid utilities, etc. most of these expenses have been out of pocket expenses.

What does your typical day look like?

If you would like to figure out what your typical day looks like... contact A Step Beyond.ca