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• May 2, 2022

When she first decided to move out of her parents' home to live on her own in downtown Toronto, recent university grad Shaarujaa Nadarajah quickly realized she needed to develop her own approach to budgeting her personal finances. In the video above, she shares her story.


You've recently graduated college or university and now are eager to transition from student to professional life.

While the entire process can be nerve-wracking, having a budget that reflects this new stage of your life can help you achieve certain financial goals and it doesn't have to be daunting, says Curtis Leung, a TD Assistant Branch Manager based in Richmond, British Columbia.

When it comes to creating your own budget, Leung shares his advice below about the general features of a good budget, including what to include, what not to overlook, as well as some tips on how to help cut back on some of those overspending habits.

What do I need to do before I start creating a budget?

"First things first, you need to get a clear understanding of your income after tax," says Leung.

If you're not working full-time right away or are working in the gig economy and not making the same amount each month, your monthly after-tax income would be your average monthly take-home pay.

Next, Leung recommends making a list of your monthly expenses, including any loans and outstanding debt, as well as your grocery and utility bills, cell phone bill, car payments and other regular bills.

Don't forget to include semi-annual or annual charges, such as gym membership fees and if you own a vehicle, yearly maintenance, repair costs, he says.

If you need help crunching those numbers, a tool like the TD Personal Cash Flow Calculator can help.

Once you have a handle on what you make and what you're spending, it's time to think about why you want to create a budget.

"For example, is your goal to manage your expenses so that you can pay down debt sooner than their due date?" says Leung.

"Or are you thinking about moving out into your own space and saving for that purpose? Being clear about your financial goals can be a great motivator in helping you stick to any budget you create."

What should my budget include?

One common strategy that Leung suggests you consider is the "50/30/20" rule.

This means that 50 per cent of your income covers your needs (rent, groceries, transportation, utilities, etc.); 30 per cent covers your wants (memberships, dining out, vacations, hobbies, etc.); and 20 per cent is allocated to paying down debt or saving for the future (saving for a house, creating an emergency fund, etc.).

Depending on the amount of money you have remaining each month once you've addressed your needs, you may want to apply more of that "leftover" money towards paying down any debt you may have, or put it towards saving up for a place of your own, instead of towards a "want" like travel or dining out, he says.

Leung says, in general, a good budget should tell you how much your after-tax pay is, how much your expenses cost (including any debt), and how much money you can be saving.

How can I stick to my budget?

Leung says when it comes to spending, it can be easy to overlook the impact "small purchases" may have on your budget. Leung recommends using digital tools or apps like TD MySpend that can help you manage your finances by sending you alerts based on your spending habits.

"Sometimes you may spend more than you intend to. If and when that happens, it doesn't mean you should give up on your budget or financial goals," says Leung.

When it comes to the goal of saving enough money for a down payment on a home, Leung says keeping separate bank accounts has helped keep him on track in her personal life.

For example, utilizing a chequing account solely for expenses related to your needs, while creating a separate savings account (or accounts) strictly for your future financial goals, can be a good way to keep you on track with your budget. With this approach, you may be less tempted to use money that you've specifically ear-marked for a special purpose.

Leung says it's important to revisit your budget on a regular basis to ensure that you are on track and that it is still working for you and whatever situation you may find yourself in. You should consider checking it not just once a year but as often as monthly or even every few weeks.

"If you find that you cannot stick to your budget, then you've got to look at why that is," he says.

Leung states there may be several reasons why someone isn't able to stick to their budget.

"If your after-tax income isn't predictable, you may have underestimated how much you are able to save while still paying for all your necessary expenses," says Leung.

"Alternatively, you may have gone on a spending binge, and you should determine whether it was because you wanted to treat yourself or because an unexpected emergency came up that required your immediate attention."

Whatever the reason, Leung recommends re-evaluating your financial goals, including your estimated timelines to achieve them.

"Remember, budgets can take time to create and implement and finding a strategy that works for you can take some trial and error. So, don't get discouraged. Revisit your budget on a regular basis to address any ups and downs before they have a chance to overtake your financial goals."

Want to learn more about your money?
Tax brackets and marginal tax rates in Canada – A few basics
Love & Money: How to financially recover after a breakup
Helping your kids buy a home – 'The Bank of Mom and Dad'

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