How to Find Your Financial Balance
This week, the FCAC kicked off Financial Literacy Month—one full month dedicated to bringing awareness to the need for more financial education and resources for individuals and families and help build their financial resilience. Week one is all about finding your financial balance in the midst of inflation and high interest rates.
Managing your finances can feel overwhelming but just like everything else in life, it’s all about finding balance—balancing your budget, balancing your debt versus your income, and balancing your spending with your saving. This last one might feel especially impossible with inflation at the highest we’ve seen in a very long time. You may also be carrying some debt and struggling to save any money at all.
Dealing with debt is exhausting and, during a recession when money is tight, high debt payments can feel even more insurmountable. Not to mention, if you’re struggling to make your day-to-day expenses, it’s so easy for your debt to pile up and spiral out of control.
The first step to finding financial balance and successfully paying down your debts is creating a realistic budget. So, let’s start off with some budgeting essentials and then later in the week, we’ll move on to some strategies you can take to soften the toll that inflation may be taking on your finances, protect your existing savings, and develop better financial health overall.
How to Balance Your Budget
Balancing your budget is the key to financial success and there are a few tried and true budgeting tips to help you find a method for you that works. The FCAC has a great Budget Planner or you can just start with a blank piece of paper and a pencil.
1. Calculate Your Monthly (Net!) Income
This is the foundation of your budget. Your net income is the total money that hits your bank account after taxes, benefits, and all other deductions have been taken off. If you focus on your total wages rather than your net “take-home” pay, you’ll inevitably overspend since you’ll think you have more money to spend then you really do.
If you’re self-employed, a contractor, or a gig worker then budgeting might prove to be a bit more challenging for you. If the amount you receive changes from month to month, try using an average amount instead. Plan to save more during your busiest months to make up for months when your income might be lower, and don’t forget to account for savings, retirement planning, and taxes.
2. Track Your Spending
Once you know exactly how much money you’ll have in your bank account each month, the next step is to understand where it’s going. Track and categorize your expenses so that you can determine what you are spending the most money on and where it might be easiest to save. Start by listing your fixed expenses. These are regular monthly bills such as rent, hydro, and your car payment. Next, list your variable expenses. These are expenses that may change from month to month, such as groceries, gas, and entertainment. This is the area that has the most opportunity for you to find ways to cut back (think: Netflix OR Crave, but not both. Skipping the Starbucks line, taking public transit, packing your lunch, etc.).
3. Budget for Extra Expenses (a.k.a. make room for fun!)
Sure, spending too much money can be fun today but it jeopardizes your future. But, on the flip side, saving too much money right now might be great for your future but it can make you miserable today! The bottom line is that it’s not sustainable to only spend money on things you need. There are times when you want to splurge on a new pair of sunglasses or head to the movies with your friends or family. If you have the money to make it work, create (and stick to!) a budget for the evening and go have some fun! Once you find a budget that works for you, set aside a specific amount to spend on extras.
4. Review Your Budget Regularly
Once you complete your budget, it’s important to revisit it, and your spending, on a regular basis. This will help you stay on track. Life changes! You might get a raise, have a baby, move to a new city. You might achieve a financial goal and want to plan for a new one. This is exactly why you need to check in with your budget and your financial goals consistently.
Taking the time now to find the right financial balance will ensure you’re happy and financial secure today and prepare you for any unpredictable financial difficulties in the future.
Don’t be afraid to reach out for help.
Some if you reading this might be drowning in debt, and the idea of budgeting and trying to find balance feels impossible. You’re not alone. With the cost of living at a crisis point for many people in BC, some of us may be forced to seek the advice of a debt professional. If you do a quick Google search, you’ll find a ton of organizations promising to get you out of debt, but here’s the thing – they’re not all equal in their expertise or have the legal solutions available to help you.
Before you work with just any organization to resolve your debt problems, it’s extremely important to check their credentials as there are some key differences between a Licensed and an Unlicensed Debt Professional.
Our Licensed Insolvency Trustees are always happy to walk you through your options and answer any questions you might—free of charge and free of judgement. Reach out and book a free consultation now.