This video is all about budgeting. I’m
gonna be sharing some helpful tips that have been key to my success in budgeting
and saving for the things that have mattered most to me.
This channel is all about making personal finance easy, so we can be more
confident and independent with our money. If that sounds like something that
you’re interested in, hit the subscribe button and let’s get started on today’s
topic. As a financial planner, a common question I would get is “how much do you
think I should be saving”? There’s a few different ways that you can answer this
question, but this is usually what I suggest: Your first step should always be
to set a goal. Now this might sound obvious, but it’s so important because it
really sets a foundation of that target that you’re going to be working towards.
So your goal might be to pay off a credit card bill that’s been lingering
for a little too long or it could be to buy a house in five years. Your next step
is going to be analyzing your cash flow and that’s because the amount that you
should be saving is going to be unique to you based on your individual
circumstances. For that reason, I usually suggest working backwards and analyzing
your finances by creating a report similar to this one. You can download a
copy of this worksheet for free from our website at
The goal is to try to have an understanding of how much money you’re
bringing in versus how much money you’re spending. The amount you bring in is
going to be the after-tax amount that gets deposited into your bank account.
The amount that you spend should then be separated into two different lists: one
for your fixed expenses and one for the variable expenses. Your fixed expenses
are going to be those costs that no matter what, they must be paid: like rent,
a mortgage payment, utilities, groceries, etc., the common necessities that you
can’t or don’t want to live without. If you’re a student and you take the bus to
school every day, then your bus pass would be another example of a fixed cost.
Sure maybe you could walk to school or work every day if you really had to, but
it may not be reasonable to do so. Your variable expenses on the other hand will
be things that you can live without if you needed to, like maybe that dinner
out, monthly music or video game subscriptions, takeout, maybe some of
those extra TV or movie packages and maybe even the internet. If your worker
schooling relies on the internet, then perhaps this is going to be something
that you’ll put into the fixed column. You want to break up your variable and
fix expenses for two reasons: the first reason is to show yourself how much
you’re really spending on a monthly basis on things that are necessary and
things that are not. Very often we tend to become desensitized to the amount of
money we spend on things that are more of a leisure than a necessity. The second
reason is motivation, if you’re in a situation where you just aren’t able to
save money or you could save money but your discretionary spending is too high,
understanding why you have a shortfall will help motivate you to either spend
less or look for ways to earn more. Once you’ve figured out how much you earned
and how much you spend, you can now determine how much you can
save within your individual means. If the difference between what you make and
what you spend is close to zero or negative, then you need to review your
discretionary list to see which items you can live without at least for now. If
you’re in the same spot and you have no discretionary spending, then see if
there’s ways to reduce your fixed expenses like renting a cheaper space,
cycling to work or school during those warmer months, and making more meals at
home versus prepackaged meals from the grocery store. Anything that can help
lower those monthly costs. Your next step is now to determine how long it’s going
to take you to reach your goal based on your current cash flow situation and
then you adjust. Let’s assume that when you did your cash flow exercise you
determine that you had about $150 a pay on a bi-weekly
basis that you could set aside and save. Your goal is to buy a home in five years
and the type of property that you’re hoping to buy is around the$350,000
dollar mark. So based on this, if you live in Canada
your downpayment needs to be at least $17,500. So over
a period of 5 years in order to save that amount you need to save $3,500 a year or about $135/bi-weekly pay. This of course assumes that you’re simply depositing the money into a bank
account and not earning any interest and we’re also assuming that the cost of
your purchase is not going to go up. Whenever possible, if you’re saving for a
goal that is more than a year away, try to increase the amount that you’re
saving by 2% – 3% a year to be safe. If after completing your
worksheet you determine that the amount that you can save is less than what you
need to reach your goal on time, then you do have a few options to consider:
Review those variable expenses to see if there are items that you can live
without at least for the time being. Another option try and see if you can
increase your income either through side jobs or going after those promotions at
your current workplace. If you’re saving for a big-ticket item, then maybe
consider a lower purchase price that fits within your current budget.
That’s why setting your goal and working through that worksheet is so important,
it takes your vision and puts it into reality based on your current situation.
This wraps up our video on budgeting and saving. For more helpful tips and tools,
check out our website If you liked the video,
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