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Why Your Budget Matters and How to Stay on Track

By Jordan Lavin for

Quick. How much money did you spend on restaurants last month? Do you know?

On the same line of questioning, how much money did you save last month?

Having a budget isn’t about making sure your savings account is stuffed full at the expense of never eating out again. Budgeting is about making decisions about how you want to spend your money so that you can do all of the things you want to do. In other words, it’s not about how much you spent on restaurants and savings; it’s about knowing how much you spent on restaurants and savings.

Need a budget? Make one now.

If your image of a budget involves dense spreadsheets, take a deep breath. Here’s a really easy way to make a simple budget you can start using right away.

1. Make a list of all the income you receive in a given month. This probably includes employment income, but it might also include child support, money you make from odd jobs, and payments from the government.

2. Make a list of all the must-have things you spend money on in a month. This could include your mortgage or rent, heating costs, insurance, groceries, etc.

3. Make a list of all your monthly consumer debt payments. Consider credit cards, lines of credit, loans and car payments. If your debts are under control, consider adding savings to this list.

4. Make a list of all the other items you spend money on in a month. This could include restaurants, entertainment, and subscription services like Netflix and Spotify. Apps like Butter can help you keep track of all your subscriptions and quickly see how your costs add up.

Once you’ve listed out all your income and expenses, subtract the must-haves from your income. The money left over can be divvied among your debts, saving and nice-to-haves.

If there’s not enough money to cover everything, you will need to make some decisions about where to cut back. There’s no need to cut out avocados and lattes if that’s what you love, you just need to decide what you’re willing to sacrifice to have the things you want.

Stick to that budget

There are lots of different ways people stick to their budget. You just need to find the right one for you.

One popular choice is the envelope method. Make an envelope for every line item on your budget. Then, every payday, take out all your money in cash and put the appropriate amount in each envelope. When the envelope is empty, you’re done spending.

You can also use apps to track your spending. Some even link up with your online banking and credit cards so transactions get charted instantly and you get notifications when you’re approaching your limit or getting charged.

Add in a saving strategy

It’s okay if you’re not saving 40% of your income every month – leave that to the personal finance bloggers. But you should be saving something and working on saving more as time goes by.

A good strategy for saving, especially if your budget is tight, is to dedicate any “found” money to savings. That could include gifts, tax refunds, or cash you pick up through a side hustle. This strategy won’t get you rich anytime soon, but it leaves more wiggle room in your budget and it’s better than not saving at all.

Found money can also include cashback, either from apps like Butter and from a credit card. Using no-fee credit cards can be a good way to earn cash back on the purchases you would make anyway, as long as you use it responsibly and aim to pay off your balance each month. If you carry a balance, you’ll save more money by switching to a low-interest credit card (and you’ll save the most money by aiming to pay off that debt as quickly as possible).

To make your savings work for you, consider opening a high-interest savings account. These accounts pay much more interest than typical bank savings accounts, so your money will grow without you having to work for it.

Find more ways to save

Don’t think about saving as just what you do with the money that’s leftover. You should also look for ways to reduce your monthly expenses.

Even saving just a few pennies on the dollar can add up to big savings over time. A $9.99 monthly subscription adds up to $119.88 a year. Once you add up four or five of these, they can take a big chunk out of your income. Reducing services (and looking for free alternatives like switching to no-fee chequing accounts instead of a pricey $30 a month option) can go a long way to making your budget more breathable.

Sweat the small stuff, but not all the small stuff

Budgeting isn’t something you can realistically do once and nail it. It takes lots of patience, and you need to give yourself permission to make mistakes as long as you learn from them. Think of it as a project to work on and continuously improve.

Don't let unwanted subscriptions creep up on you.

Keep track of all your subscriptions in one place with the Butter app.
Get it now

Don't let unwanted subscriptions creep up on you.

Keep track of all your subscriptions in one place with the Butter app.
Get it now
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Don't let unwanted subscriptions creep up on you.

Keep track of all your subscriptions in one place with the Butter app.