Making a Budget in 3 Steps

7 min.

Need help creating your budget? Follow our guide in 3 easy steps and be sure to plan for everything.

According to the 2019 Canadian Financial Capability Survey conducted by the Government of Canada, “about 1 in 6 Canadians (17%) say their monthly spending exceeds their income, while 1 in 4 (27%) say they borrow to buy food or pay for daily expenses.”

To stay on track with your financial goals, a budget is an indispensable tool. It allows you to keep track of how much money you have coming in and going out, to identify unnecessary expenses and to help you set aside money for your personal goals.

Find out more about the benefits of having a detailed budget and the key elements it should include.

Why do you need a budget?

Did you know that, according to the Financial Consumer Agency of Canada, around 51% of Canadians don’t have a budget? The main reasons behind this statistic are said to be a lack of interest or time and a feeling of being overwhelmed by managing one’s finances.

However, based on the 2019 Canadian Financial Capability Survey, people who have a budget are less likely to default on their financial obligations, are more effective in managing their finances, and are less inclined to live beyond their means or have to borrow money to meet their expenses. Having a budget can even help you pay off your mortgage and other debts faster!

Having a monthly budget is useful for:

  • Knowing where your money goes and setting spending limits
  • Deciding how much money to put into savings
  • Allocating part of your income to pay your debts
  • Feeling in control of your finances
  • Planning for projects that are important to you, such as a trip or renovations
  • Living within your real financial means
  • Reducing your stress related to managing your money

Steps for creating your budget:

Creating your own monthly budget is much easier than you might think. Generally, there are three steps to follow.

1- Set your goals

In this first step, think about specific goals you would like to achieve with your money. Then, set a date for when you would like to achieve them.

Here are some examples of goals you could include in your budget:

  • Go on a trip
  • Pay off your credit cards
  • Save for a house or condo
  • Invest in your child’s RESP
  • Be able to put a specific amount in your RRSP or TFSA every month
  • Pay off a debt
  • Build up an emergency fund (to cover your expenses in case of a disability or for unexpected renovations)

The important thing is to choose goals that you will be able to achieve and that are important to you in order to stay motivated.

2- Calculate your income and your expenses

The second step is no doubt the longest. It involves making a list of all your income and all your fixed expenses. To make it easier, hold on to your bills for an entire month and check your statement of transactions available in your online bank account.

Once this list is completed, it will serve you for years to come. Think of this step as an investment of time towards your financial wellbeing!

3- Adjust your budget every month

Lastly, at the end of every month, calculate the following: YOUR MONTHLY INCOME – YOUR MONTHLY EXPENSES

The result of this calculation is the amount you are able to put aside each month for your personal goals. If this amount is too small, check whether there is a category of expenses that could be lower next month, such as eating out or buying coffee from a coffee shop.

Items to include in your budget

By category, here are the items that should be included in your budget in the ‘monthly expenses’ section:


Personal insurance (if not deducted directly from your pay)


  • Car payment (loan or lease)
  • Public transit (taxi, bus, subway, etc.)
  • Car expenses (gas, maintenance, repairs, tires)
  • Car insurance or leisure vehicle insurance
  • Parking
  • Registration and driver’s license

Telecommunication services

  • Landline phone
  • Mobile phone
  • Cable or satellite TV
  • Internet

Leisure and education

  • Tuition fees
  • School materials
  • Sports and leisure activities (gym, shows, classes, etc.)
  • Subscriptions (Netflix, Spotify, magazines, etc.)
  • Childcare or babysitting
  • Lotteries
  • Travel


  • Groceries
  • Alcohol
  • Restaurants


  • Health care
  • Dental care
  • Vision care
  • Personal care and pharmacy (hygiene products, medications, etc.)

Debt payments

  • Credit card 1
  • Credit card 2
  • Line of credit
  • Personal loan
  • Student loan
  • RRSP loan
  • RESP loan
  • Investment loan
  • Home Buyers’ Plan (HBP)

Other expenses

  • Clothing
  • Hair
  • Esthetics
  • Tobacco products
  • Alimony
  • Pet care (food, veterinary care, grooming)
  • Gifts

Here are the items that should be included in your budget in the ‘monthly savings’ section:

  • Emergency fund
  • Registered investments (RRSP)
  • Non-registered investments (GICs or other)
  • TFSA
  • RESP
  • FHSA

By category, here are the items that should be included in your budget in the ‘monthly income’ section:

  • Net employment income (with premiums, bonuses, commissions and tips)
  • Scholarships and grants
  • Net rental income

Pension or other net benefits

  • Child tax benefit and family allowance
  • Alimony
  • Social assistance
  • Annuities
  • Registered retirement income fund (RRIF) income
  • Life income fund (LIF) income
  • Registered pension plan (pension fund) income
  • Canada Pension Plan (CPP) or Québec Pension Plan (QPP) pension
  • Old Age Security (OAS) and Guaranteed Income Supplement (GIS) pension


  • Investment income

Our tips

In closing, here are some tips to keep in mind to ensure that your budget is optimal and that it keeps up with your situation over the years.

  • Give yourself leeway: It is often safer to round up your expenses to ensure that you are able to cover any unforeseen events that may arise, such as an appliance that stops working or a water leak in your home.
  • Identify repetitive and unnecessary expenses: When tracking your budget from month to month, identify recurring expenses that could be reduced. The classic example is that yummy little latte from your favourite barista! Think about it, three five-dollar coffees a week adds up to $780 over the course of the year.
  • Plan for expenses that come back at the same time each year: Vehicle registration, snow removal and municipal taxes are all expenses that you can budget for in advance to ensure that you have the money in your pocket when it comes time to pay.
  • Adjust your budget when something changes: Whenever your income changes or a new life event occurs (such as the arrival of a baby or the purchase of a property), take the time to adjust your budget to avoid any unpleasant surprises or new financial stress.

Last but not least, don’t hesitate to call on the expertise of a financial security advisor when making your budget. This expert will guide you in making the right choices to help you maximize the money you work so hard to earn.


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