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Budget Essentials – Putting a plan to paper

To many people, a budget is simply an overall outline for where the money they have available will be allocated over a certain time period. Although a budget is a great way to track your expenses based on your day-to-day needs, at the end of the day (or month), there’s still a chance you will find yourself with less money in your account than expected because your budget hasn't accounted for unexpected expenses. The following are four suggestions for keeping your budget on track:

1) Start with a clear goal in mind
Most of your greatest accomplishments probably started with one goal. It should be the same when creating your budget. Why is this budget important to you? What are you budgeting for? To save for a renovation or a down payment on a house? To have enough money left over contribute a specific amount to your registered retirement savings plan each month? It could be as simple as being able to sleep at night knowing that you have a plan to repay your debt. The key is to have a goal in mind, and then to plan out what has to happen to make that goal a reality.

2) Track all of your spending
This is the eye-opening part. Track down everything you spend over one month (or two) so you have a better idea of exactly where your money is going. This will include the big things like your mortgage, car payments, bills, groceries, etc. Make note of all your smaller purchases too – coffees, drinks and dinners out, etc. These are expenses that are not usually thought of or planned for, but can really add up at the end of each month. This doesn't have to be a tedious process. There are some great apps that make tracking your monthly expenses easy.

3) Create a budget worksheet
Now that you have an idea of where your money is going, you can create a more formal budget to follow. There are plenty of great online budget calculators you can try out. Include all your monthly expenses, as well as your monthly income and any other sources of cash that you may have available. This should give you a good idea of any shortfalls you may have in reaching your goal.

4) Try it out! Then revise and review
Live with your budget for a few months. Maybe you over- or under-estimated some of your expenses. Move things around accordingly. The key is to make the budget realistic and adjust your budget where possible to help you reach your goal. Being financially responsible and having a plan in place is a great way to reach your goal.

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