How to Make your Budget in 4 Steps

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In order for you to have the most realistic budget possible, you have to know all your expenses of the last year. You can look at the transactions on your credit card and bank account statements. You can also find out your salary by consulting your pay stub. Most of the time, it is easier to make your budget for one month because several expenses are paid every month, like rent and electricity.

There are a number of tools that allow you to make a budget based on your needs. Our budget management tool  is simple to use, and you can save it or print it. For a more interactive tool, try the Government of Canada's, budget planner .

Here is how to make a monthly budget in four steps:

1. Determine your monthly available income.
2. Determine your monthly fixed expenses.
3. Determine your variable expenses.
4. Subtract your monthly expenses from your available income.

Step 1: Determine your monthly available income

Your available income is what is left in your pocket after income tax deductions are made from Québec and Canada, and after you have paid your social contributions for the Québec Pension Plan, employment insurance and the Québec Parental Insurance Plan. Depending on your case, family allowances, GST credit and solidarity tax credit can also be part of your available income.

To calculate your available income:

• if you receive a pay every week, multiply it by 52 and divide the result by 12;
• if you receive a pay every two weeks, multiply it by 26 and divide the result by 12.

Step 2: Determine your monthly fixed expenses

They are expenses that you know in advance and they are often similar from month to month, for example:

• rent or mortgage;
• electricity and heating;
• television, telephone and Internet;
• municipal and school taxes, if you are an owner;
• insurance: home, auto, life and/or disability;
• daycare, if you have children;
• debts to repay;
• bank account fees, etc. 

Step 3: Determine your variable expenses

Variable expenses are how much you spend for everything else, for example:

• food at the grocery store and restaurants;
• clothes; 
• transportation: bus or subway tickets, gas, taxi fares, parking;
• outings;
• sports and courses;
• beauty products, medications;
• expenses for children, if you have any;
• expenses for your pet, if you have one;
• gifts and donations;
• home maintenance and decoration, etc.

The list is endless and different for everyone.

If you are hesitating on the amount you spend in one category, keep your invoices and calculate the amount you spent for one or two months.

If there is one expense that you make every week and would like to know how much it represents for a month, multiply the amount by 4.3. There is an average of 4.3 weeks in a month.

Step 4: Subtract your monthly expenses from your available income

You now have to determine how much money you have left when you calculate your available income minus your monthly expenses.

The result of that equation is the money you can save. Then, you can distribute it based on your projects or goals, like your emergency fund.

If the result is negative, it is unfortunate, but you will have to review your expenses. If living costs more than what you earn, you are indebted every month. Some expenses are absolutely necessary. The rest depends on you, your needs and your values. You are the only who knows what is truly important and what is less important.