Thank you to everyone who attended the budgeting webinar on Tuesday, January 29th. Be sure to join us next week for our webinar on Income & Taxation. A recap of the budgeting webinar is below:

 

The budgeting webinar is designed to explain what money is, how we get it, and how to budget it. Money is defined as “an object of value accepted as payment for a good or a service”. Although it has been around for centuries, money is constantly adapting and changing to fit society’s needs. You can do four things with money; save, spend, invest or give it away. The key is to take a disciplined approach to how you manage your money. Exercising money decision discipline will allow you to have fun and be less stressed about money and, over time, become money successful.

 

The most commonly used budgeting formula is "Income - Expenses = Savings"

 

Many people make the mistake of not looking at their budget beyond this simple formula listed above. People tend to assume that they will save or invest only what is left over after paying their bills or spending money on fun things like going out with friends. The problem with this thinking is that without deciding in advance where your money will go, there is usually very little, or none, left for saving.

 

Lets rearrange the formula to pay yourself first?   Income – Savings = Expenses

 

By making this one simple change, you will better position yourself to achieve financial success because you are making your goals a priority. There are easy ways to pay yourself first that require no time or effort on your part each month. Try setting up an automatic savings plan directly from your bank account – make it out of sight, out of mind. It is surprising how quickly a person can learn to live within the amount that is left over and how quickly that savings will grow when you aren’t thinking about it each month.

 

Why use a budget?

 

A budget can be established on a daily, weekly, or monthly basis, and the level of detail within can vary greatly. What’s important for individuals, is to establish a budget the best suits your needs and modify the budget appropriately as needs change.

 

A budget serves 5 main purposes:

1. It allows you to effectively track cash in (income) and cash out (expenses) and set appropriate spending limits.

 

2. As we have already mentioned the importance of, a budget should help determine savings needed to achieve the things that are important to you in both the short and the long-term.

• Paying yourself first should help you more easily achieve your financial goals.

3. A budget also helps to manage your monthly bills and expenses, setting you up to actually live within your means.

 

4. If you have been ‘honest’ with yourself, it should always account for the unexpected – emergencies and life events that we hope never happen, but sometimes do.

• As a general rule of thumb, it is recommended that individuals save 3 months worth of expenses within their emergency funds.

5. Overall, your goal should be to always ensure that your income fewer savings is always greater than your expenses.

• If this is not the case, then it will demonstrate a need to cut out unnecessary spending to stop overspending in the future and potentially generating debt.

There are many online tools available to assist in creating a budget. These tools can save you a lot of time and enable you to make quick “what if” calculations. Leveraging the same tool each month will make your budget easy to update and maintain, and, you get to see the results immediately.

 

To access RBC Wealth Management’s budget calculator, please click here

 

Be sure to check out our upcoming financial literacy webinars and other events here.