Last week, I attended the Chartered Professional Accountants (CPA) Mastering Money Virtual Conference 2021. It was a thought-provoking program, covering both personal finance and issues affecting small and medium sized businesses. As is the case with these conferences, I have a long list of follow-up reading to do, with some commentary to follow in the weeks to come.
Many of the presentations included statistics from surveys about the current state of Canadians and our finances. Some of the survey results are concerning. For example, FP Canada reported from their Financial Stress Index 2021 that 38% of Canadians say money causes them the most stress in their lives. Financial stress has caused health issues for 31% of Canadians, and has caused marriage/relationship problems (15%), family disputes (15%), and distractions and reduced productivity at work (14%). Younger Canadians (under age 35) believe that saving more (52%), paying down debt (40%), having an emergency fund (44%), creating a budget (43%), building a financial plan (36%), or understanding their expenses (27%) would help alleviate financial stress.
I have good news! The Financial and Consumer Agency of Canada (FCAC) has made available an online interactive budget planner to help Canadians to create a budget. Visit canada.ca/budget-planner to start your budget.
A budget is a tool to help you manage your finances. A budget can help guide your spending in order to help you reach your financial goals. Preparing a budget can help you to:
- Set limits on spending;
- Reduce costs and save more;
- Prioritize spending in particular categories;
- Feel in control of your money; and
- Reduce stress.
How to start? If most of your spending is done via electronic means (credit and debit), you can get a good picture of your spending from looking at recent bank and credit card statements. Add up your income and expenses in each of the budget categories and enter these amounts in the interactive budget planner. If you don’t have electronic banking records, record your expenses for the next month and enter them into the interactive budget planner.
The budget will provide a picture of how you have been spending your money. The next step is to look at your spending and decide if you would like to make any changes to your spending patterns. The budget tool will give you personalized suggestions based on what you have entered in your budget. Now is a good time to think about your financial goals. Perhaps you would like to repay debt or start saving for a long-term goal (e.g., a home down payment)? Examine your spending categories and look at where expenses can be reduced and money redirected toward your financial goals.
Your new budget will now guide your future spending. As much as possible, limit your spending to what has been budgeting in each expense category. At the end of each month, compare your budget to what you actually spent in the month. As your financial situation changes (e.g., pay raise), revisit your budget to ensure that it accurately reflects your current financial situation.
So, there’s your homework for the week. Happy budgeting!
Life Lessons 