How to create a household budget

Building a budget is the first step in financial planning. People often resist creating a plan, worrying it will restrict their spending. But it’s often an eye-opening experience and one that makes you feel in control of your money. 

Budget specifics for CAF families

Military families are adventurous -- moving a lot, interesting past-times, traveling -- which means your financial situation is fluid. Having a budget gives you a baseline so you can meet your financial goals, no matter where life takes you.

Why create a budget?

• Gain control over your money
• Reduce stress around spending
• Prioritize the things that matter
• Maintain a baseline, even when life changes happen

Seven steps to creating a budget

1. Calculate your income

This includes your salary, and other salaries that come into the house. But it also includes money you may get back on your income tax return, child tax benefits, GST rebates, interest income and monetary gifts. For military members, keep in mind per diems, posting allowances and other benefits you may receive, depending on your current position at work and where you live, that could boost your income at different points in the year or in your career.

2. Set goals

This includes short, medium and long-term goals. Think of what you want to spend money on. Set SMART goals – Specific, measurable, achievable, relevant and time-bound. In other words, what do you want to do, specifically, and by when? How will you know when you’ve reached your goal? 

Financial goals can be big like paying off a mortgage or setting money aside for your child’s education. Small financial goals matter too, like saving for your next family vacation or setting aside money for Christmas. Military members often find value when they save for their next posting, deployment period or for unexpected expenses that arise when they relocate. 

3. List your expenses

Expenses are divided into three distinctive categories. 

• Fixed expenses are stable and necessary costs such as rent, household bills, debt repayment and insurance. 
• Variable expenses include necessities that fluctuate, such as gas and food, but also seasonal costs like vacations, relocation costs or seasonal childcare. 
• Discretionary expenses are things we want but don’t necessarily need, like eating out, subscriptions, impulse purchases and savings. Discretionary spending is the easiest line item in your budget to adjust.

4. Compare income and expenses

Ideally, the money you bring in is greater than the money you’re spending. If expenses exceed income, it’s time to examine where your discretionary expenses could be trimmed, or find ways to bring in more income. This could include someone in the house getting a part-time job, or selling items you don’t use anymore. Sometimes debt reconsolidation can help.

5. Develop a spending plan

Keeping track of your spending is empowering. You see clearly how well you stick to your plan and where you need to adjust spending to keep on track with your budget. There are many apps available to help you keep track of receipts so you can visualize your spending plan.

6. Pay yourself first and save

Once you have your budget in place, you can automate savings to create a healthy nest egg and make sure you have money for the things you want in life. This goes back to the goals you’ve set, which could be a house down payment or a lifestyle shift in retirement.

7. Review and update your plan

When things change in your life – a relocation, a promotion or something unexpected –sit down with a SISIP expert and review your budget. You can adjust your budget at any time to fit your circumstances. Having that plan in place reduces stress when life changes happen. With a solid budget, money is just one less thing to worry about.

When should I review my budget? It’s a good idea to examine your budget annually. But if something big happens – a posting, a new child in the family, a job loss, or a major purchase like a new home – it’s time to adapt your plan.

Can a budget help me save money? Once you have a budget in place, it’s easy to find ways to save money for the things you really want. 

Who can help you with my financial plan? SISIP Financial counsellors and advisors are available to sit down with any CAF member, veteran or spouse to help develop your budget and make a long-term plan for your financial success. 

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This article was written, designed and produced by SISIP Financial, for the benefit of SISIP Financial, Investment Funds Advisor, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.  Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.