Step 2: Identify Income and Expenses
Once you have established some goals for your money, it’s time to look at where it comes from and where it goes right now. When we manage our money, it’s easy to get into habits. Some money management habits are positive and allow us to reap rewards later on. Others are negative and can lead us into trouble. Start by making a list of all your household income sources and the amounts. Include everything: wages (after taxes), commissions, self–employment income, child tax benefits, pensions, child maintenance & spousal support, and other regular income.
To make your list, print these Budget Worksheet pages and fill in the column labeled “initial.”
Now it’s time to record your spending. This can be difficult because, for most people, they are clear about where their money comes from, but not as certain about where it goes. Spending includes everything you spend your money on; all of what you may typically think of as “expenses” (utility bills, groceries, transportation costs), but savings for a rainy day, debt payments, life insurance premiums and RRSP contributions are all expenses as well.
If you keep records of family spending, this is the best place to start. Many families don’t record their spending, so you may need to gather spending information from bank account or credit card statements, cheque register books, receipts or bills.
Some of our spending is on a weekly or monthly basis, e.g. fuel for the car, groceries, paying utility bills. There are also seasonal or annual expenses that need to be accounted for in our budget, e.g. gifts, vet bills, holidays, home repair, new glasses or clothing. To calculate monthly amounts for your annual expenses, simply divide the amount that you spend each year on these items by 12.
Looking back and identifying expenses is a valuable start. You may, however, have noticed that there seems to be more money going out than you have records for. That’s because every family has spending “leakage” – the little things that aren’t accounted for, but add up.