How to Save Money » Budgeting

Control Your Spending With A Budget

Looking to reduce your spending and save more money? While many dread the word, the best way to accomplish these goals may be creating and following a budget.

Before you can set up a budget and look for ways to improve, you’ll need to know what you are doing now. This could be done in Excel or even on paper. First, gather up all your regular bills, including your mortgage or rent. While some bills may be the same amount every month, for the bills that fluctuate from month to month you may want to look  at a few months to figure out their average expense. If you want to be more conservative, use the largest bill instead of the average.

You’ll need to have a realistic idea of how much you spend on other things like food, gas, clothing and entertainment. Do you use a credit card or bank card for all your purchases? Great, you’ll be able to log in to your bank’s web site and view at least a month’s worth of data, if not more. If you use cash and have not kept track in the past, a simple way to see what you’re spending on is to carry around a notebook for at least a month. Every time you spend money, record how much and what it was for. Once you have this, you may find some monthly totals were not what you would have guessed. Are there any areas you can cut back on?

The other expenses that some forget to include in their budget are the occasional expected expenses like property taxes, holidays, birthdays and membership or subscription renewals. For these expenses, divide then by 12 and put money aside for them each month. There are also unexpected expenses, like car repairs or having to pay an insurance deductible, but we’ll get to how to deal with them in a bit.

After you have figured out how much money is spent on expenses each month, you better add your monthly income in there to pay for it all. Have a look at how much of your money is available after the expenses. Is there as much as you expected?

You’ll likely get the best improvement in your finances by using the money that is left to pay down any credit cards or loans that you have a balance on. Start with the highest interest rate first and continue until your debts are eliminated.

Once you have reduced your spending and are debt free, the final part of your budget should be allocating your remaining money to savings. Your first priority should be to have an emergency fund for the unexpected expenses I mentioned above. Chances are, your minimum emergency fund should be $1,000 to $2,000, so plan out your savings to achieve that amount as soon as you can. With the emergency fund taken care of, you may want to focus on an RRSP, TFSA, RESP or maybe paying down more of your mortgage.

And the most important thing… stick to your budget! If you set a limit for entertainment don’t go over. If you set a minimum savings amount, make sure you meet that goal. Budgeting can be a great tool, but only if you use it properly.

I’ve previously mentioned how Mint can help you track your spending and create a budget. Check back tomorrow for a review of a new  budgeting website that does a few things differently and also works for Canadians!


  1. andrewbpaterson

    I have been tracking my spending for several years.
    I always find it easier to simply know how much my wife and I spend in different categories, than to actually conceive a target amount and force myself to spend less!

    Budgets are great things, until you actually have to change your lifestyle!

    I recently did this activity (monthly spending targets), and found that we could easily trim $500/month! Once the credit card debt is paid off, I think we need to implement the (dreaded) envelope system!!!

    All in the name of financial freedom, right???

  2. TexasT

    I just recently posted how I budget (spreadsheet included in Step#3), and I wonder if it might help your readers or just confuse the hell out of ’em! 🙂

    • Tom Drake

      Looks like a good budgeting spreadsheet, worth a download!

  3. Luke

    Great post, thanks! I’m a big fan of tracking expenses and budgeting. I use the envelope method, but I don’t like using cash (it tends to slip through my fingers and is very hard to track).

    So I created some software to help me with it. I used to use a spreadsheet, but NeoBudget has saved me hours of manual entry time, since it can import my bank statement.

  4. Lainey

    Yay, a fellow Canadian! I don’t think I’ve ever come across another Canadian personal finance blogger before. I…don’t get out much. 😉

    I just use Google Docs for my budgeting. It’s like Excel, but online. I do have to do a lot of the work myself, though.

  5. Hareiana

    I drove myself into serious debt until a friend persuaded me to start budgeting and told me about Out Of The Dark Budgeting. This free budgeting site made a huge difference for me because it made money management so simple for me and it provides many good suggestions and advice. I particularly like the cash put aside feature and credit card debt terminator both of which helped me move from bad spending habits to responsible money management so now I waste less and have more for what I really need and love, and most importantly, I am on my way to being debt free, a very powerful feeling already. Good luck.

  6. Hareiana

    An excellent online free budgeting tool which I am using for over 2 years now is OUT OF THE DARK (OOTD) budgeting. Powerful yet easy budgeting, secure, safe, anonymous to use and unconditionally free.

Leave a reply

Your email address will not be published. Required fields are marked*