budgeting sustainably for real life

Drawing up a useful, sustainable monthly budget for your family does not have to be a complicated, or difficult exercise.  The primary goal for putting a budget to paper in our case is saving money and living well within our means.  This will enable us to save enough money so that we can maximize investment growth, capital stability, and be financially secure for years down the road.  You can tailor your budget to serve as a tool for meeting your financial goals.

If you have some basic Microsoft Excel skills you can draw up a useful budget that can serve your tracking needs for years.  I'm not referring to an advanced budget that they might teach you in an online MBA program; just a simple budget.  First you should check your pay stub and your partner's pay stub to determine exactly what your net income is. 

(I use the net amount that we bring home in employment income after RRSP contributions, taxes, etc.  The reason that I do it this way is that our RRSP contributions are fixed and they are deducted automatically so that we never really see this money.  I know what our RRSP contributions are and if I wanted to I could calculate these savings as extra to our budget later on.  For now I just choose to exclude them and know that we are setting aside at least 10% of our income before we even get started here.)

This will be your INCOME section.  Use your net employment income and any other income you receive along with any government child care benefits.  Enter the monthly values in Excel and get to a total income number.

(I choose not to include investment income here because I save 100% of these funds and they get reinvested. I don't consider this as flexible, liquid funds such as employment income as the money really never leaves our portfolios)

Next you need to create your EXPENSES section.  This involves categorizing and filling in all of your monthly expenses from mortgage payments to gym fees.  Try to think of everything and try to be conservative for fuzzy ones.  For some fixed costs such as property tax you will be able to enter an exact amount and for some categories such as entertainment you will need to ballpark what you spend in this area in an average month.  Total up this area as well.

Then take your total from your INCOME section and subtract your EXPENSES section.  Hopefully you get a positive value.  Your will arrive at a figure which I call my "TOTAL NON-REGISTERED SAVINGS PER MONTH". 

How To Use Your Budget
Creating your budget is only one third of the battle.  How you are going to use it is the second piece of the puzzle.  Instead of holding us to only spend $40 per month on haircuts I don't pay particular attention to these small details once they are part of my budget calculator.  The way I use the budget tool is that I key in on our TOTAL NON-REGISTERED SAVINGS PER MONTH.  This is our pass or fail mark.  If this guide number is $1,000 and a month goes by where we saved only $500, I usually know why this has occurred.  Could have been that the dishwasher needed replacing, or it perhaps we went on a small vacation.  If I don't know why, I better re-visit the budget. 

Obviously the third piece of the puzzle is actually matching your life to what you you have entered on this Excel calculator. If you are regularly spending $500 per month on clothes then don't enter $50 per month in your clothes category.  You will certainly need your partner to be a team player throughout this entire process

I find this to be a pretty useful way to budget.  You don't have to watch your nickels and dimes and track every penny.  Just pay attention to how much money you are actually saving versus what your budget says that you should be and you will be well on your way to achieving your financial goals.