What is a budget?
In its simplest terms, a budget is a tool that helps you manage and track your money. To utilize a budget to the best of your ability, you will need to plan and consider all of the factors that will ultimately impact how much you can save. After all, being able to save money for your future is the real end goal when it comes to budgeting. A common misconception of budgeting is that you need to have a lot of money to even consider being able to save. But the truth is: it’s not about how much money you have, it’s about how you manage it.
Creating a plan for your financial future can feel overwhelming, but it doesn’t have to feel that way. In this Budgeting 101 Webinar, Prepped partnered with RBC Campus Advisors, Fabiana Sutter and Jared Estrada, to break down everything you need to know about budgeting to set yourself up for financial success.
The first step in creating a budget is to determine a few key factors:
How much money is coming in – The dollar amount owed to you through income, allowance or other means of the money that belongs solely to you.
How much money is going out – The amount of money you owe for expenses like groceries, rent, bills, commuting and more.
How much money you can spend – The balance after all of your non-negotiable expenses are covered.
How much money you can save on any given day, week, or month – An estimate of what you can afford to save based on timelines that relate to your specific budgeting needs.
Decide what you need vs. what you want
When you are living within your budget it means you likely have less stress and will be able to prioritize how much money will go toward your wants versus your needs. If you find yourself in a situation where you are constantly going over your budget, you may experience additional stress and begin overspending. Understanding the difference and how to navigate it is key to budgeting success.
Trimming down your expenses will be easier when you can identify what your essential items are so you can build them into your budget. These items are generally things you can’t live without like a roof over your head, clothing, and food. It also includes the non-negotiables in your budget, like bills and loans you have to pay every month.
Set financial goals
The first goal you should have in mind is paying down any debt you have acquired from loans, credit cards and other financial obligations. Once that is taken care of, you will be able to identify where you can save money. And once you know how much money you can save each day, week or month, you will be able to set goals that give you the ability to pay for a dream vacation or a large ticket item you otherwise wouldn’t be able to afford.
These specific callouts are just the basics to help get you started. Watch the full Budgeting 101 webinar to learn additional information about how to manage your money like where to find extra money, ways to monitor your money and tips on how to build a personalized template for budgeting tracking. Booking an appointment with a Financial Advisor is a smart way to connect with an expert who can answer your questions in detail, and help you build a plan. And don’t forget, Prepped offers free tools that can help you further improve your networking skills. Sign up with Prepped and immediately gain access to resources that will help you grow your career.
This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.