Financial tune-up: The importance of budgeting
Credit Counselling Society helps Winnipeggers deal with their debts
Budgeting and debt management are the most basic and crucial parts of making and maintaining a healthy financial life.
"Budgets are important; they are basically a road map for your spending. They are going to show you where your money is going, where it should go. It's going to help you for debt repayment and savings," said Sandra Fry, a credit counsellor with the Credit Counselling Society here in Winnipeg.
"Most people don't have a budget," she added. "They've never been taught or don't know how to do it."
Approximately 1,000 people were counselled in Winnipeg at the society's downtown office last year. Nationally, the non-profit organization disbursed $3.7 million to creditors in the month of December alone.
"It's all about what's important, priorities."
Fry explains that often people end up living on credit or over-extending themselves because they've had a crisis, such as a job loss, downsizing close to retirement, and injuries that force people off work.
"Young couples that accumulate too much debt having families, [maternity] leave, things like that. We see a lot of immigrants as well that are given credit like candy and don't know how to use it because they come from countries where they don't have credit," said Fry.
When clients first come through the door at CCS, they are given a sheet of questions and options for people that are struggling with debt management:
- Have you communicated your situation to your creditors?
- Are you able to increase your income and decrease expenses?
- Have you approached your financial institution about consolidating your debt?
- Do you have non-essential assets you can sell?
- Do you have family or friends that can help?
Then clients are offered various options that include consumer proposals, debt settlement or bankruptcy.
For Fry, it is about finding what works for each client's situation.
"When they come to us, we sit down and make a budget with them. We have lots of great budgeting tools that people can use on their own," she said.
"It's really going to be based on your basics first. Housing, food, transportation, those are your necessities. Then beyond that you can go back through what you've spent in the past, whether it's your bank statement or credit card statement, or whatever, where is it going."
Steps in making a budget
- Break down all your necessities and fixed costs (housing, food, transportation).
- Track expenses. Use old bank and credit card statements to get an accurate picture of where your money has been going every month or pay period.
- Make a realistic budget. Don't forget to plan for seasonal or unexpected expenses.
- Find ways to cut your expenses. Weigh what you really need versus what you'd rather save for.
- Third-party budget applications can be helpful, but education and awareness is key. Melanie Buffel, a money coach with Money Coaches Canada, has worked in financial literacy for over 15 years and agrees that the process ideally takes four to six months.
"Get assessed, start on a budget plan and then stay on that track," she said.
It doesn't end there, though. "You start tracking your finances, but you need to continue to track them and then get a handle on what every dollar is doing," she said. "Every month, money comes in and money goes out. You need to give every dollar a job."
- Now that you have a budget, you need to spend some time and look for some creative ways to cut your costs wherever you can.
Click along as CBC Manitoba explores personal finances, budgeting, debt, money-saving tips and financial planning in this six-part series.