Let me first preface this post by saying I am by no means a money expert. If you were to ask my closest friends and family a few years ago how I am with finances and budgeting, they would have laughed. But after a few years, lots of debt, money issues and living pay cheque to pay cheque, I’ve learned a lot about budgeting, money management, and saving. I’ve tried a few different ways of budgeting but this method seemed to work the best for me. I will also say that I’m really open about my money issues and what I’ve learned and gone through so if you have any questions feel free to comment below.
I used The ‘20/30/50’ Method to make a new budget this year and found it the easiest to work with and the most straightforward. Making a budget + tracking your spending can be very eye-opening if you’re diligent with it. It can show you where you’re overspending, where you might need to increase savings or income or where you might have extra money that’s unallocated. The budget I make is just for myself – J handles his money separately, which works for us – so all my numbers are for ‘my half’. You can download an editable copy of my ‘20/30/50’ budget and try it out for yourself!
Okay, so The ‘20/30/50’ Method has three categories and each number stands for a percentage of your total monthly income. So for example, 20 is 20% allocated to savings. The categories are:
50% – Must Have
Rent, utilities, car payments, #AdultThings that you need every month that no one really enjoys paying for – am I right? You’ll see in the template that among my must-haves I also budget for taxis and Car2Gos. Luckily my company reimburses me for the metro pass, so most of that budget gets used on taxis, Uber, and car shares. We live in midtown Toronto and don’t have car payments or parking but occasionally use a car share program or take taxis + Uber.
20% – Savings + Debt
This is fairly self-explanatory. I am on a debt repayment program so I like to allocate as much money to that every month as I can. However, J and I decided to start saving at least $100 from every pay cheque. I’m more confident in my spending habits and was able to move some money around to do so. Sometimes if I’m having a good month I’ll even put more than $100 in after all my debt + must haves are taken care of. Debt repayment is always going to be a top priority for me but it’s good to save. I also put money into an RRSP at work, which comes out every pay cheque and I don’t even notice. I would recommend doing that with your company as well, especially if they do partial or full match contributions. I promise you won’t even notice it’s ‘gone’.
30% – Everything Else
Anything that doesn’t fall into the above two categories, don’t forget bank fees!
This is always the first area that I look at to cut down on spending. For example, I switched from TD to PC Financial because I was tired of spending on bank fees. PC is a great option for ‘free banking’. If switching isn’t an option, look into how much you get charged in bank fees every month – I never did and it was astonishing to see it add up! Try to find an account that has as little monthly or annual fees as possible (that still fits what you need it for). Eating out has been a big adjustment for J and me! Before we got our condo together we were eating out a lot because we never had groceries. Now that we budget groceries into it, have our own kitchen and enjoy cooking again, we can cut down on eating out. I like to keep the ‘everything else’ category as small as possible. I have an ‘everything else’ line item in there, which is just my miscellaneous category for monthly expenses that don’t fit elsewhere.
In addition to budgeting, I also track my expenses using the app “Expense 5”. It’s been my favorite expense tracking app so far and the easiest to use. I actually prefer not attaching my bank account to a spending app because I find manual entry easier and more accurate. If you want an app that attaches to your bank account, I recommend Mint.
It’s recommended that you re-adjust your budget every month but I haven’t gotten that intense about it yet. This is a good starting off point. I recently had my best friend do this budget to help her assess where she can save and used it to help her goal plan for the future. For example, if you want to move out but haven’t yet, you can use this budget to make a ‘mockup’ of what living solo or with a roommate would cost and whether you can afford it.
I hope this was helpful!