One of the most critical steps to achieving financial stability is creating — and maintaining — a budget.
What does that mean exactly? It means drawing up a financial plan that includes your income and expenses, tracking minute details so you can manage your money effectively. It’s helpful regardless of the stage of life, too. Whether you’re a college student, a recent graduate, or an experienced professional, a personal budget can help you reach your financial goals — and probably remove some stress in the process.
Clinton Orr, a Senior Wealth Advisor and Senior Portfolio Manager with CG Wealth Management, has been preaching the benefits of budgeting for a long time.
He got his start in the financial industry back in 2003, establishing himself as a finance guru. Clinton Orr has a straightforward approach to explain budgeting — and how the average person can take control of their finances.
“You would be surprised by how many Canadians don’t have a financial budget,” Clinton Orr said. “Many of us spend our money without considering a long game, and that can leave people unable to save or invest the amount of money they want.”
Creating A Budget
The first step to creating a budget is to identify your sources of income.
This includes your salary, any additional sources of income, and any other benefits you may receive. After that, you need to create a list of all your expenses. This includes your rent or mortgage payments, utilities, transportation costs, food, and entertainment.
Given that most banks now offer itemized online statements, you don’t need to spend hours going over receipts. Just use a monthly statement to see every time you’ve used your card. Cash transactions, of course, will need a little more forethought and careful maintenance of receipts.
“You need to categorize your expenses into essential and non-essential expenses. Essential expenses are those that are necessary for your basic needs, such as food, housing, and transportation,” says Clinton Orr. “Non-essential expenses are those that are not necessary for your basic needs, such as entertainment, eating out, and hobbies.”
After categorizing your expenses, you need to create a budget plan. This involves allocating your income to cover your essential expenses first. Then you allocate the remaining funds to cover your non-essential expenses.
This step is crucial. You need to ensure that you have enough funds to cover your essential expenses before allocating funds to non-essential ones (and sorry, but streaming services count as non-essential spending).
Sticking to Your Budget
Once you have created a budget, the next step is simply following it.
However, that’s often easier said than done, especially if you have a lot of non-essential expenses. But learning to adhere to your budget is essential to achieving financial stability, Orr said.
One strategy is to consistently monitor your spending. This involves keeping a record of all your expenses and comparing them to your budget plan. This will help you identify areas where you may be overspending, and allow you to make adjustments to your budget plan accordingly.
If you’re the type of person that needs some organization, try to set specific times for checking if you’re still on track to meet your goals, like two times a week, or even daily at the same time.
“Another way to stick to your budget is to set financial goals. This can include saving for a down payment on a home, paying off debt, or building an emergency fund,” explains Orr. “Setting financial goals can help motivate you to stick to your budget, as you will have a clear sense of what you are working towards.”
Tips for Successful Budgeting
Here are some tips to help you create and stick to a successful budget:
- Be realistic about your income and expenses
- Prioritize your essential expenses first
- Look for ways to reduce your expenses
- Consider using budgeting tools or apps to track your expenses
- Be flexible and adjust your budget as needed
- Work with a financial professional to develop a plan
If you’re having trouble doing this on your own, it never hurts to hire an experienced professional to help guide you.
“By identifying your sources of income and expenses, categorizing your expenses, creating a budget plan, and tracking your expenses, you can effectively manage your money and reach your financial goals,” said Orr. “ Remember to be realistic, prioritize your essential expenses, and set financial goals to help motivate you to stick to your budget. With these tips, you can take control of your finances and achieve financial stability.”
CANACCORD GENUITY WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA
The comments and opinions expressed in this article are solely the work of Clinton Orr, not an official publication of Canaccord Genuity Corp., and may differ from the opinion of Canaccord Genuity Corp’s. Research Department. Accordingly, they should not be considered as representative of Canaccord Genuity Corp’s. beliefs, opinions or recommendations. All information is given as of the date appearing in this article, is for general information only, does not constitute legal or tax advice, and the author Clinton Orr does not assume any obligation to update it or to advise on further developments related. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability.
Tax & Estate advice offered through Canaccord Genuity Wealth & Estate Planning
