All About Budgets

How We Designed Our Budget Step 7- Creating A Balanced Budget



I’m going to warn you this is a bit of a long post so take your time reading it since it’s about having a balanced budget.

This step in the budgeting process is critical to the success of your financial health because if you spend more than you earn you’re essentially creating debt which you want to avoid.

Balancing the budget is a fairly simple task provided you have enough money to go around. If you are not balancing a budget or using one you’re likely tossing money out the window without even thinking about it even if you think you aren’t.

It doesn’t  matter how much money you make each month, it’s  all about what you do with it. A budget keeps track of what’s coming in and what’s going out and what you’ve got left. If you don’t keep track of your money you could be spending more than you think.

It’s your choice, your life!

Creating a Balanced Budget

Balancing a budget takes time and won’t happen over night. Once you think you have everything something else creeps in. When we talked about How we designed our Budget Step 1 – Gathering All the Information, where I asked you to round-up everything you need to pay, this is the part  where it is going to come in handy.

You should already know your Net Income not your Gross Income from Step 1. Your Net Income is what your employer deposits into your bank account. You need to use your basic Net Income not including any overtime or bonuses.

One thing people tend to forget about in the budget is those handy ATM charges. If you are just starting to budget keep in mind that you need to track those ATM charges otherwise you may wind up with less than you think .

Balanced Budget Proccess

How we Balanced our Budget using the Canadian Budget Binder Budget Sheet (CBBBS)

Net Income Total-$5742.00

Balancing the Net Income to the Actual expenses is just to make sure all income is allocated. We have $5742.00  to use in our budget for the month, even though our Net Income may be more.

We don’t include any overtime or “other pay” in our Budgeted Income as Net Income varies month to month. Base your budget on the lowest monthly income you bring in (Basic hours, no overtime, no  bonuses etc).

We have a section titled “Extra Income” where we input Gift cards won, earned,given, extra money made, mail in rebates, garage sales, account interest (you can put whatever categories you want in the CBBBS).

Any income made over our typical net goes to our savings. Others might want to use this for paying down consumer debt or the mortgage.  It’s up to you!

Categories and Projected Expenses

We thought of  every category that is essential to our household budget. Since we recently finished designing the “Canadian Budget Binder Budget Sheet” our Categories will differ from our February Budget and Step 2 in designing the Budget as things have changed.

We also made categories for EVERYTHING we knew we would have to pay for (projected expenses) at some point in the year. You will always be tweaking your budget and this is essential as we all change, life changes, as did our budget.

The blank areas are areas I removed because in the Canadian Budget Binder we created random categories as well such as “Cell Phone”, “Home Phone” where as we bundle it someone else might not. I’ve chosen to remove the one’s we don’t use for easier viewing here.

Monthly Budget Totals $5,742.00
Allowance $15.00
Car Repair/Maintenance p$11.00
Christmas p$25.00
Clothing p$10.00
Dental/Medical p$5.00
Electricity and Water $153.05
Emergency Savings $1568.73
Entertainment p$7.00
E-Test p$4.00
Furnace/Hot Water Rental p$37.46
Gas (Domestic) $59.19
Gasoline/Diesel (Car) $192.00
Grocery $190.00
Home Maintenance $50.00
Home/Car Insurance $189.46
Income Tax Filing p$2.50
Investments $767.00
Licence Renewal Fees p$11.84
Life Insurance $135.05
Lottery $12.00
Membership/Clubs/Sports p$6.00
Miscellaneous $294.50
Mortgage $1,470.13
Parking p$5.00
Pet p$2.08
Property Taxes p$287.45
Sticker (Car) p$16.00
Telecommunications $165.56
Work Tools p$50.00

These projected expenses are not surprises you just know you will get the bill at some point. You will see the letter “p” next to our projected expenses. We took the total for the  projected expense and divided it by 12 to give us a monthly figure which we need to save for.

These numbers could change for us since I’m still waiting for a pay that has no overtime for an exact figure. I was just given a raise this past month so once I get that figure I will update them if necessary.

The projected money goes into a separate Savings Account that we opened just for these items. The money is transferred and used when we need to pay for the item/service. We also bank money in our budget for items where we didn’t use the budgeted money  ie: clothing and entertainment

When the bill arrives for a projected expense the money gets transferred to our Chequing Account manually by us to get paid. We continue to save for each projected expense until the end of the year whether it is paid or not, because the money has to come from somewhere.

I know it’s a bit more work BUT we know at the end of the day the money WILL be in the account when that projected expense comes in. We won’t be scrambling for money we saved for it all year-long.

Once you have all your categories set up you can now divide your Net Income  into these categories. Make sure your “Fixed” expenses get paid first as they are expenses you “have to pay

We try to stick to the golden percentages below when designing our personal budget as per ex Til Debt Do Us Part TV host Gail Vaz Oxlade.

You may notice we have no debt but the mortgage, so our percentages will be a bit different.

Note– We’ve since paid our mortgage in full 2014 and our budget has changed as you will note in our monthly budget updates.

Category Expenses too high

If you figure out your expenses are higher in each category you need to do one of three things

  1. Make more money $$$
  2. Stop spending on crap
  3. Get rid of stuff you don’t need – IPhone, Internet, Cable etc until you can balance your budget, car- take the bus
What  if the above isn’t an option?
  1. You need to sell or move to a cheaper place unless you win the lottery or have rich family members/friends who will give you some free money!
What % it should be according to Gail….
Housing  35%
Transportation 15%
Life 25%
Debt Repaymen 15%
Savings  10%

Understanding Fixed Expenses

What are Fixed Expenses?

Fixed expenses are the same amount of money each month unless a rate increase is realized :ie your cable company changes their pricing. Go through your budget categories and figure out which one’s are fixed and which are variable so you know.

  • Mortgage/Rent
  • Utilities- All
  • Insurances- Home, Health
  • Car/Truck Payments
  • Child Care/Babysitting
  • Condo/Maintenance Fees
  • TFSA- Investments
  • RRSP- Investments
  • RESP- Investments
  • Etc……
Total up your  fixed expenses so you know how much it will cost you! You need a $ figure to work with.

Then you see how much $$$ you have left to pay your “variable expenses

Understanding Variable Expenses

What are Variable Expenses?

Variable expenses are costs go up and down each month and typically are not the same. I call  these expenses “everything else” not listed above.

  • Clothing
  • Gas/Petrol
  • Debt repayment
  • Entertainment
  • Dental/Medical
  • Pet (s)
  • Groceries
  • Public Transit (bus etc)
  • Bank Fees/ATM
  • Emergency Savings
  • Etc….

You have to make sure you think of EVERYTHING you need to pay for otherwise you won’t be setting up a “true balanced budget“.

Now we know how much is in each category to spend each month.  Every time we come home with a receipt it goes into our handy file folder on our desk. Once a week, usually on a Sunday we sit down and go through the receipts.

We open the bank account on-line, check everything that has gone through that week and enter it into the CBBBS. ie: Mortgage payment, Insurance. We also input all our receipts and then file them in our folder that reads “entered” meaning it’s in the system.

Our Canadian Budget Binder Spreadsheet automatically shows you how much is left in the category as you input the data. If you are one of these people who are in serious debt I recommend you enter the data each day so you know where you stand.

I don’t care if you use budget jars, envelopes or any other budgeting systems or apps which helps you to see your money input and output. All you need to know is “how much” is left to spend so you don’t spend more than you earn.

Canadian Budget Binder Spreadsheet Screen shot

The Canadian Budget Binder Budget Spreadsheet will show you these three important figures:

  1. Budgeted Amount
  2. The Actual Amount Spent
  3. The Difference Between the two

The CBBBS also tells us what amount $ has to go into the Savings account for those ‘”projected expenses“.

Once you move the money to the savings account input the data in the CBBBS and under what category and the money saved will be reflected in its own category. It will tell you how much you have moved so far in the month.

$475.33 Needs to go to Savings for Projected Expenses

The CBBBS will also show you if you have spent more than you made in the month and how much.  If we stick to the budget we know how much will end up in our Emergency Savings (ES) at the end of the month.

If we spend more than we budgeted for in the categories this will come out of  that Savings figure.

We don’t encourage overspending nor using your emergency savings for anything BUT emergency savings, so STICK  TO THE BUDGET.

Don’t worry we fall off the wagon once in a while, we’re all human.

Note: The Grocery Game Challenge ran from 2012-2018 and you can read all of our blog posts in The Ultimate Grocery Shopping Guide for more grocery savings info in Canada.

This is why we designed The Grocery Game Challenge as we spent far too much on groceries last year and wanted to curb that spending.

We are working hard at making changes to our grocery budget but it is difficult when you know you are stocking up on a good deal and have the ES to cover it.

Not everyone has an emergency savings that they can pull money from if they spend more than they make but the key is NOT to do this.

We then have to ask ourselves if our budgeted amount in a category is realistic and maybe we should change it. If you don’t have the means to change it then you better STICK to the plan or make more money!

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  1. Thanks for this great budget. What is the best way to account for pre-tax rrsp savings since the budget is based net income? Claiming the savings will mess up the budget monthly totals, but not claiming the savings results in my savings % being artificially low.

  2. That is one serious budget! I really need to get down to business about determining where I could save even more. I use to track my purchases, and I keep up on my savings goals, but there’s always room for improvement.

    1. Hey Stephen,
      Yes we really broke it down and personalized it for our own family. I’ve heard of mint but we are happy with our Canadian Budget Binder Spreadsheet that we designed. It has provided us with everything we need to understand our finances. Yes, there is always room for improvement.. we are constantly improving. Cheers Mate.. Mr.CBB

  3. Great tips on budgeting, I have some work to do on mine. I am a teacher and I get paid over ten months, any suggestions on how to list monthly income.

    1. I would look at my basic net monthly income and then divide it over 12 months and that would give me a monthly figure to work with. I would then have to take the excess each month for the 10 months and bank it for the last 2 months or whenever you will need the money. You don’t get any type of unemployment as I presume it’s in the summer you get off? In Canada teachers get unemployment during the months they are not teaching and reg salary when they are, and a damn good pension!

          1. Everywhere’s a mess mate.. even me mates back home want me to post them some petrol lol… it’s just crazy. It makes me feel better to be ahead of the game a bit then lagging behind.

  4. wow my budget needs an overhaul! We have curbed our spending on groceries we were also going well over budget and buying uneccesary things we have nearly cut it in half instead of nearly 250-350 a week on shopping we are now on avereage 200 a week its a huge saving and we are now able to do other things. Biggest thing this year is to pay cash for a van for me having not had one for 5yrs (since moving here actually) and being stuck in the sticks is not good and kids need the freedom in the summer. So I have a policy from the UK which will give me a great return to get me a van all with cash I can’t wait. When you putting out your sheet in full?

    1. That’s great that you are thinking about overhauling your budget. We are always thinking of things we never thought of before hand. This is why I always say to revist the budget and revise if necessary like we had to do this past 2 months. Pay cash for that van smart idea. We paid cash for my relatively new truck and the other vehicle also relatively new was paid over 5 yrs 0% interest and is paid now as well.

      As for the exchange rate in the UK… don’t get me started on that… it was $2.36 when I should have moved my money!


      1. we sold our house and got a good return in the UK just before the downturn in the housing market so we got a good exchange rate then and was able to put a huge amount down for the house here and not the 100% we thought we might have too. Since then its been really really low but hey we need to look on the bright side of things at least at the moment the economy is slightly more stable here than in the UK with all the price hikes of gas, water and electricity and the petrol OMG have you seen it and we thought is was bad here!

        1. You know you are way ahead of most so count your blessings. Our mates moved here last year and put 100% on their house and are mortgage free. They LOVE it here and are now both working. They say that they wanted to bring their family here so they would have a better opportunity than in the UK. The kids love it here as well. We are all fortunate our money is worth what it is although I’ve been chicken to move it. I need a kick in the arse let me tell you.

          1. kicking you do you feel the pain lol I don’t think the market is going to rise any further than it is and if you don’t you are going to loose alot of monies especially with the way it may go this side of the water keep a vigal on it

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