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Step 7: Looking Ahead

Any good plan must involve monitoring, periodic review, and occasional re-evaluation. A spending plan is no different. Circumstances may change, mistakes can be made and your needs will vary at different times in your life.

When you first build your spending plan, you are going to need more time to monitor it to ensure that it is based on realistic information. It will take a month to start falling into place.

During the second month, you will work out some of the kinks and the routine will start to become part of your daily thinking. It should now start to fall into place more easily.

By the third month, your spending plan should be up and running. Congratulations, you have taken control of your finances! However, if it isn’t working yet, ask yourself a few questions:

  • Did I calculate my income correctly?
  • Are my expense figures accurate?
  • Is everyone’s income and expenses accounted for?
  • Is my plan based on actual numbers or what I hope I can earn or spend?
  • Did I give it a fair chance?
  • Do I need professional advice?

For the first year, you will need to review your plan monthly. If it is working, during the second year you can review it every 3 – 4 months. After that, you will need to review it annually. However, if there are any major changes in your financial life, you will need to re-evaluate your plan and possibly change it. Some major changes might include increased transportation or housing costs or a loss or increase of income. Similarly, large purchases or expenses may mean that you will need to cut back somewhere else so that everything fits again.

As you become more in the habit of managing your money effectively, your plan will feel natural and develop into a part of how you do things in your household. Some of the steps may blend together at times or you may add a step or two to make it easier for yourself.

Life happens; give yourself permission to make changes that benefit you and your family. Having a plan with a solid foundation will allow you to come out ahead, rather than in debt.

Good luck!

A Note About Credit

Credit can afford us opportunities that may not be available to us otherwise. Most consumers who purchase their first home need a mortgage. If you would like to book a vacation on-line, you usually need a credit card. However, in order to avoid burdensome and expensive debt, you need to plan how you will use credit responsibly within what your budget allows. Some things to keep in mind to protect your credit rating as well as your financial plan:

If you can afford it, give yourself a little “mad money” each pay. You don’t need to track what you spend it on. This can be the best way to help yourself stick to your plan!
  • Only apply for credit that you need. One, maybe two credit cards, with very reasonable limits based on your income, are all you should need. Pay them off in full every month.
  • Keep all credit card balances well below the limits on all of your cards at all times.
  • Reduce your monthly debt payments (excluding mortgage payments) to no more than 15% – 20% of your take–home pay. This will allow you to manage unforeseen financial challenges effectively.
  • Keep credit limits reasonable – if you used or charged them all to the limit, you should be able to pay the full balance off within a year and leave it paid off.
  • Pay more than the minimum payment due each month on a credit card and work on bringing the balance owing down. Limit your use of the card until it is paid in full.

For more helpful information about using credit wisely check out the credit section of our site. We also have a lot of great information about how to pay off debt.

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Step 6: Manage Seasonal Expenses

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If you have income that fluctuates throughout the year, budgeting can be very difficult.

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This smart worksheet guides you through the budgeting process and makes suggestions to improve your budget.
Check out this super helpful tool
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Learn how to put together a spending plan and manage your money better.

Create a spending plan with guidance and easy steps

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.

Review of the 7 Steps to Budgeting

Below is a short summary outlining each of the seven steps we just went through. Feel free to jump back to any section you wish to look at again.

1

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

2

step two: identify your income and expenses

You probably know how much you earn each month – but do you also know where it all goes? Find out by tracking what you’re spending. Spend as you normally would, but for a few weeks, jot down every cent you spend. It’s easy and you might be amazed by what you find out. More info on this

3

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

4

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

5

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

6

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

7

step seven: look ahead

Getting on track with a budget can take a month or two. You’ve lived all this time without a spending plan, so give yourself time to adjust. Don’t be afraid to ask for help if things aren’t falling into place – help is just a phone call away.

More Budgeting Resources

If you’d like some tools to help with your budgeting or some guidance from a real person, check these out:

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