7 Steps to Build a Household Budget
Money Management Strategies
Think back to your very first pay cheque – paper route money, babysitting income or a cheque from a part–time job. Did it come with instructions? Instructions seem to be included with the simplest devices these days, and yet, with something as important as our pay cheques, we’re left to figure it out on our own. No one is born with money management skills. By the time we’re adults, we are expected to be able to manage our money effectively; however few of us are taught how. Therefore, many people experience the usual emotions that occur when they don’t know how to do something well. These may include:
- Frustration
- Guilt
- Envy
- Anger
- Shame
- Disappointment
Like driving a car or playing an instrument, the skill of managing money must be learned – and it’s never too late to start! Doing so usually pays immediate benefits. People might not earn more money if they budget well, but they will be able to use the money they do have wisely.
Someone who manages their finances responsibly has peace of mind and knows how to:
- Pay their living expenses
- Keep debts to a manageable level
- Save for the extras that make life enjoyable
- Avoid constant money anxiety
It’s not how much you make, but what you do with what you’ve got. Proper money management does not involve a magic formula to find more money. It simply means getting the most from the money you do have.
Before you read any further, take a quick look at your current money management skill level.
Answer the following questions truthfully, based on what you do today. Ask yourself how much effort do you put in managing your own money? Do you keep track of what you spent in a day, week, or month? How many times do you regret spending so much money on something that will benefit you so little? You do not need to share your answers with anyone – they are merely to help you identify how you may want to improve your own money management skills.
The foundation of sound money management is the budget. However, for many people, the word “budget” evokes feelings of fear or frustration. Your budget is your plan for your money. It is based on choices you make and priorities that you identify.
Building a spending plan, or budget, is a step–by–step process. Once complete, your budget is the solid foundation with which you can manage your current income and expenses and plan for future possibilities.
next step
Step 1: Set Goals
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Downloadable Interactive Budgeting Workbook
The steps you are going through on this page plus accompanying pages can also be viewed as an interactive PDF workbook. You can download a copy, which can be printed and filled out by hand, or you can download a fillable PDF version, which can be filled out and saved on your computer.
Feel free to share this resource with anyone you think could benefit from it.
Overview of the 7 Steps to Budgeting
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step one: set realistic goals
Goals for your money will help you make smart spending choices. Ask yourself: What do I want my finances to look like in one year? Decide what’s important to you and start there. More about this
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step two: identify your income and expenses
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step three: separate needs and wants
Ask yourself: Do I want this or do I need it? Will spending this money get me closer to my financial goals or further away? Can I live without it? Set clear priorities for yourself and the decisions become easier to make. Learn more
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step four: design your budget
Make sure that you are not spending more than you make. Balance your budget to accommodate everything you need to pay for. One easy way to do this is with our free, easy-to-use budget calculator spreadsheet and worksheet that’s built for Canadians. Learn more about crafting a budget
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step five: put your plan into action
Match your spending to when you receive your income. Decide ahead of time what you’ll use each pay cheque for. Ask yourself: Have I allocated money for my necessities (housing, food, utilities, transportation, etc.)? Have I put money aside for my debt payments, unexpected expenses, savings and the fun stuff? This will protect you from going into debt further because you won’t rely on credit to pay for your living expenses. Learn more
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step six: seasonal expenses
You know that things will “just come up” – school expenses, new shoes or an annual membership. Set money aside to pay for these expenses so you can afford them without going into debt. More on this
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step seven: look ahead
Jump Ahead
If all this looks like too much work, or you’re really looking for something much quicker right now, check these out:
- 7 Steps to a Budget Made Easy – A brief overview of this 7 step budgeting process
- Budget Calculator Spreadsheet that guides you as you build your budget and looks for ways to improve it
- Attend a free, online budgeting workshop and have someone show you what you need to know
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