How to Budget: A Step-by-Step Guide for Canadians

Whether you're trying to save for a big goal, get out of debt, or just stop wondering where your money goes at the end of every month, creating a budget is the best place to start. Contrary to popular belief, budgeting doesn’t mean cutting out everything fun, it just means giving every dollar a purpose.

In this guide on how to budget for Canadians, we will walk you through the exact steps to create a budget that works for you. And if you’d rather skip the spreadsheets and go straight to an easy, personalized budget, check out this free budgeting visualizer that does the heavy lifting for you.

Step 1: Track Your Income: Start with the total income you bring in every month. This is the total pile of money that you have at your disposal every month and will be used as the baseline for your budget. Include:

• Salary (after taxes)

• Freelance or side gig income

• Government benefits or support

• Child support or alimony

• Any other consistent income

  
  

Pro tip: Use your average income over the past 3 months if your pay varies.

Step 2: List Your Fixed Expenses: Fixed expenses are ones that remain consistent every month and can be reliably tracked in your budget. These can include:

• Rent or mortgage

• Utilities

• Insurance

• Phone bill

• Loan/Credit card payments (If you carry a balance, input the minimum monthly payment per debt in your budget)

• Subscriptions

  
  

Step 3: Budget your Necessary Variable Expenses: Variable expenses are ones that undergo slight variations month-to-month. For your budget, however, you will allocate a set amount of money to each category based on your average spend over the last 3 months. Necessary variable expense categories include:

• Groceries

• Gas

• Pet food, toiletries, makeup

Step 4: Budget your Non-Essentials: Everyone needs a little fun money, after all, that's what makes life enjoyable to live. Allocate between 15%-20% of your total monthly income to this category for now and move on to step 5.

Step 5: Calculate Your Totals: Subtract your total monthly expenses from your total monthly income:

Income – Expenses = Your Bottom Line

• If you have money left over, great! You can direct it toward your savings, investment, or debt goals.

• If you’re in the red, don’t panic. We’ll tackle that in the next step.

Step 6: Identify the Problem Areas and Prioritize Your Goals: If your expenses exceeded your income or you want more money to be going to savings, investments, or debt, look at where you can cut back.

Ask yourself:

• Can I reduce subscriptions?

• Can I temporarily sacrifice my fun spending by not eating out or shopping less?

• Can I find a cheaper car insurance plan or cheaper rent?

On the flip side, if you’re under budget, put that extra cash to work. Use this leftover money to first pay off high-interest debt (We have a great article on paying off debt here), build an emergency fund or savings, or invest in a TFSA! 

Step 7: Monitor and Adjust Monthly: A budget isn’t set in stone. Life happens — expenses change, incomes shift.

At the end of each month:

• Review your spending

• Celebrate your wins

• Adjust for next month

It’s not about perfection, it’s about progress.

Ready to Make Your Budget in Minutes? If this sounds overwhelming, don’t worry. We have created a fully customizable tool that lets you create and visualize your own personal budget! This will give you a visual representation of where your money and make it easy to follow our budgeting guide. Try the Budget Maker Tool Now