Updating your personal budget for 2019

Happy New Year! For many people, the new year is all about making good on those promises you made the previous year to improve yourself and your lifestyle.

Budgeting for the new year is a great way to start (we know it’s boring, but hear us out on this one!). Getting disciplined about budgeting leads to a healthier bank balance, and a less stressed version of yourself. After all, who doesn’t get a little nervous after an overly-indulgent shopping trip, or an unexpected bill just before payday?

Before we bring on the finance tips, let’s break down the obvious...

What is budgeting and is it really that important?

Simply put, budgeting is when you create a plan on how to spend your money. The end goal is that you’ll know ahead of time if you can afford your grand plans for 2019. You’ll definitely see the benefits of budgeting when you’re hoping to purchase a convertible in time for summer, or book roundtrip flights to Europe.

How do I budget?

The good news is, you don’t need to know algebraic equations or a magic trick to predict the future here. One of the easiest (and most effective) methods of budgeting is to use the 50-20-30 rule to split up your income each month. Calculate your monthly income, and then split it into three categories of 50%, 20% and 30% for your monthly budgets. Here’s what it looks like:

Your income

Living expenses and essentials

50% on the things you need.

rent
groceries
transportation
insurance

Savings

20% on the things you're saving for.

saving account
down payment
investments
rainy day fund

Flexible Spending

30% on the things you want.

entertainment
shopping trip
eating out
gym membership

Pretty easy, right? And a disclosure here, the categories don’t have to be these exact percentages. Your lifestyle is unique, and your earnings may need to be divided differently. For example, if high rent means you spend about 60% on the essentials (we’re looking at you Toronto and Vancouver!), then you might trim 5% off of the other two categories to stay in budget. Whatever proportions work for you, if you stick to it, you’ll have an idea of your money situation in months to come.

The basics of saving

Are you a habitual spender relying on a lottery win to fund your trip to Europe? You might want a helping hand that goes beyond calculating a spending limit. Here are a few tips to get you started and keep you on track with your budget:

How to save more money:

With all the financial technology available these days, you can save money without having to put any thought into it. Mylo is an app that does the hard work for you – simply link your bank with the app, and each purchase is rounded up to the next dollar. The change is invested for you. So, every time you buy your morning coffee for $2.50, you’ll invest $0.50 without any effort. Mylo’s saving tactic is “little and often” – it doesn’t take noticeable chunks of your paycheck at once, but you’ll see a boost in your savings in no time.
How to spend less on what you don’t need:

Ever noticed how easy it is to be spontaneous with a credit card? With features like tap-and-go and mobile pay, it’s so quick and easy to buy anything, you might’ve forgotten the price by the time you’ve left the store (no judging!).

Try going cash only for a few weeks (at least) and you should notice a change in your spending habits. Purchasing with cash not only means you have a finite amount of money on hand, you also have to physically hand over some of your hard-earned cash and watch it disappear. Plus, unless you don’t mind heavy pockets you might think twice breaking your $10 bill for a candy bar.

Tip: Eager to get your budgeting ducks in a row? Learn how to improve your finances in a month.
Prepare for the unexpected:

There are plenty of ways that life can throw you a curveball, and we’ve all been at the receiving end. Insurance allows you to budget for some unpredictable events, such as certain damage to your home, vehicle and belongings. Consider optional auto and home insurance in your budget and you could avoid some pretty heavy bills (and stress) if the unexpected happens.

Start saving on your insurance.