Ahhhh….the dreaded B word! B is for budget which is also for boring, banal, bothersome.
If you were like the old me, you absolutely recoiled at the idea of a budget. There was never any money left over after paying for necessities anyway! What was the point!? Except to hammer home the message that there wasn’t enough money left over for the things I was supposed to be doing, like putting money into emergency funds, RRSPs, and home renovations!
But that was then and this, delightedly, is now. I love working on my budget. I never got what a budget was about, really, until I had to deal with one for work.
A budget is simply a forecast of where the money will be going in a given time period. That’s all. It’s not set in stone. It’s not to the penny – that’s too much math, even for me. It’s not the law. It’s what you see happening with your money over X months (or a year). You da boss. You set the budget based on what you want to do with your money (after necessities are covered, of course). You change it as you see fit. Duh. Why did I not get this before?
About a year ago I found a great budget worksheet online (available in various formats such as Excel and Open Office) that I use to create that picture of what is going on with my hard-earned dough. Here’s where I found it:
I love this spreadsheet because it does all the thinking (and math) for you. Not only that – it tells you how you compare to other Canadians in terms of percentages you are spending on housing, food, transportation etc.
The first time I used it – once the dust had settled (literally and figuratively) from my widowhood and major renovation projects – when I got to the end of the sheet it told me that I had leftover $$ “that needed a job”! That, my friends, was thrilling! I immediately set up a monthly automatic savings plan to transfer the excess bucks from my regular chequing account into my Tangerine account. Not as much as the spreadsheet was telling me, in case I had missed or understated some expenses, but enough to feel good about finally being able to set up that emergency savings account. Since then I have finished some recurring payments (car loan, I am looking at you!) and now that money “needed a job” too – I have also set up a travel account and a tax free savings account – both of which get regular deposits from my chequing account. Painless saving and oh-so-satisfying to watch those balances grow.*
So what has this got to do with planning retirement you might be asking at this point? Well, it’s never too late to start understanding your money situation and there is no better way to do it than with a budget. Knowledge is power, and having a budget gives me the power to make the right decisions (for me) about my spending leading up to retirement. It also is giving me great data on what exactly I need to live on in my current situation and that’s good intel for the future!
*What about your RRSP, WB? (You might be asking.) Well, the small widow’s pension I started receiving since JD died I have transferred automatically into an RRSP account each month. I don’t miss it because I never had it to use, before. This combined with my employer matching my deductions from my paycheque into my work-held RRSP means I am saving almost the max allowable each year for me. And I recently instructed my financial planner at my bank to up that amount to make sure I am hitting that max. Better late than never, sez I.by