Budgeting may not be your favourite subject, but it might just be a necessary part of life in order to ensure that your finances are kept in order, and you achieve your financial goals.

If you’ve never budgeted before and/or procrastinated up to this point because you haven’t needed to or you’re not sure where or how to start, these four tips can help:

Budgeting

1. Keep Things Simple: Write down your net pay (how much gets deposited into your account).This is your income and the number from which ALL of the expenses must be subtracted from. It’s amazing how many people don’t actually know what they take home.

Make a list of your expenses. This should include your mortgage/rent payments, car payments, utility bills, cable bills, phone bills, internet bills, insurance, daycare, groceries, credit card payments, line of credit payments, other loan payments, and so forth (check your bank statements for recurring payments, whether or not they are automatic).

Subtract the expenses from your take home pay; this is what is leftover to spend on leisure expenses, such as dining out, going out to the movies, going on vacation, etc. If you get a negative number you know that you’ve got to cut back on the recurring expenses in order to keep the number in the positive.

2. Automatically Set Money Aside For Savings: Before you start allocating money on dinners and movies, you should first set-up an automatic savings withdrawal, into a separate savings account. Most people can come up with all sorts of excuses why they didn’t – or couldn’t – put money aside each month into a savings account, but you MUST.

If your employer offers a retirement savings plan, take advantage of it, and contribute to it as much as you can, especially if they match a percentage of your contribution.

3. Pay Your Bills on Time, Every Time: Sounds easier said than done, right? Paying your bills in full and on time every single month will not only help you save on the interest charges, it will also help keep your credit score healthy. It will also save you on the late fees charged by most ‘utility’ companies.

An easy thing to do is set-up a calendar appointment on the due dates with a reminder a few days prior.

4. Get an Accurate Idea of How Much You’re Spending Every Month: To really budget, you need to track what you spend money on. Without actually adding up every cent you spend on a monthly basis, it’s difficult to know exactly how much you are actually spending. While you may be able to quickly determine how much money you’re bringing in every month, determining how much you spend is a much more detailed endeavour. A quick way to determine this number is to keep every receipt and bill you get, and plug those numbers into a simple budget template on a spreadsheet. This will help you visualize everything you’re spending, and whether or not your income is able to cover it all.

Remember too that there are budgeting apps now. One of my favourites is YNAB (You Need a Budget). I try to steer clear of apps that automatically connect to my bank account, that way, I am very conscious of my spending.

Co-written with Martin Breeze, Mortgage Broker, TMG The Mortgage Group