Budgeting tactics for budget haters

If the idea of keeping track of every dollar-in and dollar-out makes your eyes glaze over, you’re not alone. Just 47 percent of Canadians report using a budget to plan their spending, according to Practical Money Skills, a financial literacy resource by Visa. But given that 90 percent of Canadians report higher debt levels than they did four years ago, some kind of money management strategy is probably a good idea.

Here are three straight forward budgeting tactics for the 53 percent of Canadians who haven’t cottoned to tracking income and expenses in a detailed budget spreadsheet or app.

Ratio budgeting

Ratio budgeting simply means allocating a portion of your after-tax income to certain financial ‘buckets’ every month. One popular one is the 50/20/30 Rule. It works like this: 50 percent of your after-tax income goes to needs – rent payments, mortgage payments, groceries, debt servicing, insurance, utilities, car payments, etc. Wants , such as entertainment, dining out, electronics, fancy clothes and other non-essentials should account for 30 percent of your income. Finally, the remaining 20 percent of your income goes to savings , which includes long or short-term savings, investments and paying down extra on debts.

Obviously, the portion of your income that goes into the needs category will vary, depending on your earnings. Set up your ‘buckets’ to fit your financial situation and be consistent every month.

Remainder budgeting

Remainder budgeting is the kind of planning you can do on the back of an envelope or napkin, and in fact most people do some form of this already.

Just add up all of your bills for a given month and subtract that total from your after-tax income. Then, subtract a set amount for savings. You’ll want to put this savings directly into your savings account. How much should you save? Make sure it’s an amount that’s going to be feasible every month. One easy way is to save about as much as you have to freely spend. So, if you have $400 left over after paying your bills, save $200 of it and use the remaining $200 to spend freely.

Pay-yourself-first budgeting

The pay-yourself-first budget is another simple budgeting method that’s unique in that it puts saving at the front of the budget line. It is exactly as it sounds. Before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income for savings. What's left is what you have to pay your bills, your rent/mortgage and all your other expenses. By doing this, you can prioritize your savings goals and make do with whatever is left over.

Typically, people seem to pay themselves last, meaning that they receive their paycheques, pay their bills and other discretionary expenses, and save the remainder, which usually is far less than what they could save if they had paid themselves first.