Expert Insight and Recommendations for Budgeting
When it comes to individuals struggling with debt, some of the most common reasons we come across are issues with personal budgeting. The Star, The Globe, The Huffington Post and CBC have all reported on the staggering about of personal household debt, and the average is more than $20,000 per household – often thanks mainly to budgeting problems.
The ease with which one can obtain credit in Canada, coupled with the growing trend to turn to this credit to make ends meet is one major reason why that average is so high.
The biggest mistake people make with their personal budgeting is budgeting to make only minimum payments, using whatever is left for themselves.
- First of all, if you owe on credit cards more than you can pay in full, you have a financial problem. If you are at the point where you only have enough cash flow any given month to make minimum payments, you have a major financial problem.
- Secondly, your budget should set out what the limit for personal expenses are as well: food, clothing, entertainment, etc. There should be an amount allotted for these expenses and the rest should be directed towards savings and planning for the future – and paying off debt!
- Finally, a healthy budget should see room for savings – if there is nothing left to save then you are living to pay creditors and possibly a lifestyle you can’t afford.
Map Out Your Cash Flow
Before addressing your personal budgeting, you need to address the things within your budget that are impacting your cash flow.
- Start recording everything you spend money on for one month, right down to a $1 chocolate bar. Don’t have a pen? Snap a pic of the receipt on your iPhone.
- Create an income and expense sheet and record everything that you spend money on.
- Review this with a financial professional who can help you make the choices needed to build a stronger financial future for your family.
Clients who participate in our programs are required to complete mandatory budget and credit counselling to look at the reasons why your past personal budgeting became problematic, and to determine what you can do to move forward on fresh footing with a plan to better manage your money.