We all have the best intentions when creating a budget, but when money gets tight, budgeting can become much more difficult. Although budgeting should be a tool available to everyone, budgeting tips often cater to people with “middle class” incomes. What if your mandatory expenses eat up most—or all—of your income? What if an unexpected blip in your financial situation (like a car repair or a missed week of work) could be enough to derail you completely?

If it feels like all you can do is make sure you have enough to cover your bills, you’re not alone. It’s still possible to use budgeting to help increase your financial security, plan for the future, and reach your goals, even on a limited income. Here’s how to get started:

Rethinking budgeting

If you’ve spent any time researching budgeting strategies, you’ve probably come across many tips and tricks that dictate that your “needs” (such as rent, groceries, transportation) should account for roughly 50 percent of your income.

However for many Albertans, only spending 50 percent on “needs” may not be realistic. Sometimes meeting your household’s needs consumes all of your income. Unexpected expenses can even make determining the difference between a “want” and a “need” difficult to discern. For example, although many people would automatically categorize new shoes as a “want”, if you need new shoes to be presentable at work, it changes the equation.

High expense or low income budgeting

So let’s try a new set of budgeting categories, based on your real monthly spending: fixed expenses, variable expenses, and savings.

Fixed expenses are expenses that are relatively consistent month-to-month. Rent/mortgage payments, student loan payments, internet services, and insurance are examples of expenses that automatically fall into this category. Other expenses (like groceries, clothing, electricity and phone bills) might fall into the fixed expense or the variable expense category, depending on the consistency of your lifestyle.

Variable expenses change based on the month. And as we all know, some months are harder than others. While some variable expenses are discretionary (like concert tickets or a night out at the bar), others (like vet bills) are not.

Savings are personalized around your financial goals. This category includes any money you put into a savings account, registered savings plan, investment account, or cookie jar rather than spending it on your immediate needs and wants. By contributing money to a savings or investment program like ATB Prosper, you are investing in yourself and your future.

We have created a budgeting worksheet to help you determine how much you’re spending on these three categories. Download the interactive sheet here to calculate and categorize your monthly expenses and learn more about your spending habits. We recommend completing the worksheet before moving on so that you can better understand how the advice below relates to your personal financial situation.

Gaining financial confidence

Now that you have a clear idea of where your money is currently going, you can look at two important and related questions:

1. Are there areas where you can cut down on either fixed or variable expenses?
2. If yes, where could that money be put to better use?

For some people, the money they refrain from spending every month is best put toward a savings or investing goal (like a more reliable vehicle, higher education, retirement, a couch). For some, that money is more useful as a way to increase the rate at which they can pay off high-interest debt (like a payday loan or credit card). Sometimes, the money saved on one spending item (like a streaming service) needs to go toward another item (like prescription medication). And for many people, building an emergency fund is a top priority.

The most important thing is that you feel confident in how you’re choosing to allocate your limited resources. A flexible, personalized budget is a great way to make those choices more clear.

Revamping your budget

Fixed expenses

In a lot of cases, fixed expenses are difficult to cut back on because they are often also mandatory expenses. If, however, you are able to cut down on even one of your fixed expenses, you can immediately funnel that money into an automatic savings deposit or debt payment. You won’t even miss it.

Here are a few ways to cut down on common fixed expenses:

• Move to a less expensive house or apartment, rent out your basement, or get a roommate
• Shop around for better prices and change your internet, phone, or insurance provider
• Unsubscribe from memberships, subscriptions, and streaming services that do not bring you joy
• Clip coupons and take advantage of deals and price matching at grocery stores
• See if there are services (such as wifi, subscription software, and streaming services) you can share with a friend, partner or neighbour
• Be more efficient with your utility usage. It’s good for your wallet and the planet!
• Purge clutter you are paying to store
• Trade childcare with a friend or neighbour
• Transfer high-interest debt to a lower interest loan or line of credit

Variable expenses

Variable expenses are also tough to tackle, because you have to make daily decisions about when and how to spend. Although variable expenses are more likely to be discretionary, the largest variable expenses are often emergencies—unexpected changes to health, employment status, housing, or transportation options.

In fact, one of the best ways to reduce the toll of variable expenses on your monthly budget is to create an emergency fund to cover things like medication, time off work, childcare, appliance replacement, intermediate accommodations, traffic tickets and vehicle repair.

A few more suggestions:

• Be aware of how your friends, family and colleagues influence your spending. It’s ok to say no. Feeling pressured to spend on food, gifts, personal loans, events and alcohol is not going to increase your financial confidence—or the wiggle room in your budget. If your budget is tight, try examining three month’s worth of financial statements to determine how much you are really spending on things like eating out - the number might surprise you! A financial advisor can also do a review of your account and help identify opportunities to save.
• Try sticking to a predetermined spending cap on categories like clothing, cosmetics and coffee. You can use budgeting apps like ATB TrackIt to help you. One advantage of a budgeting app is that it makes it easier to keep track of spending on credit cards.
• Parking, taxis, ride shares, repairs, and other transportation-related expenses can put a big dent in your budget. Consider taking public transit, selling a second vehicle, investigating car share programs, or setting up regular carpooling dates with a neighbour.
• Regardless of how you reduce your variable spending, make sure you have a way to redirect the money. Try transferring the unspent funds immediately into a separate account. Or just make a note of what you didn’t spend, and decide what to do with the money at the end of the month. If possible, use this new found space in your budget to contribute to an investment account so that money can grow into more money!

Debt repayment

Consumer debt can get a lot of people into financial trouble. Consumer debt is created by purchasing things that do not appreciate in value, where things like student loans or mortgages are considered ‘good debt’ because they are an investment.

If you have consumer debt, you should look at each debt and analyze the interest rate, balance and requirement payment to determine how you will prioritize quick payment and manage current cash flow. Through proper budgeting you can free up cash flow to make debt principal repayments (thus reducing interest payments) and keep-up on monthly expenses; alleviating the need to go into further debt.

Maintaining your budget

Life isn’t static, and your budget shouldn’t be either, which is why it’s important to check in with yourself. Not only can your income and expenses change, your priorities can change too. Make sure you reevaluate your budget on a regular basis, and pay attention to the ways in which the small changes you’re making now can add up to accelerated change in the future.

We hope this article has inspired you to either create a budget or revisit your budget. We encourage you to save the budget sheet you completed about and revisit it monthly. Budgeting shouldn’t be stressful, in fact keeping an active budget will result in a better understanding of your financial position, proactive financial planning and less anxiety about money. Don’t hesitate to lean on your financial advisor for budgeting guidance and advice, they are there to help you achieve your financial goals!

Ultimately, being a good budgeter means being a good financial planner. Organizing your finances now will give you the opportunity to allocate more of your money towards saving goals such as an emergency fund, a house down payment or even retirement.