Mention the word "budget" to some people and you'll likely be met with cringes and winces, the kind usually seen from dentists' chairs. It's not very surprising because the perception about making a budget is that it requires us to think carefully about how and where we spend our money. And most of the time we have no idea. While it takes discipline to plan and implement a good budget, it doesn't have to be rocket science. We asked Jean-Rémy Deschênes, business coordinator in the Wealth Management department at Desjardins Group, for advice on how to create an effective plan.

Why don't budgets work?

One of the main reasons they don't work is because the person:

• lacks a clear understanding of their actual financial situation
• is unaware of their actual day-to-day expenditures
• hasn't defined their financial needs, interests, objectives and goals
• has gotten carried away by debt and has allowed their savings to lag

What steps should we follow to finally get on track?

It's important to remember that the initial process of setting up your budget will require a bit of effort, but it's worth it in the long run.

• Keep it simple: Your budget should be straight-forward and flexible so it can be easily modified if your income or expenses change
• Set your financial objectives: Your objectives should be realistic, measurable and time-bound. This will help you stick to your budget and to reach your financial goals and projects
• Be realistic and specific about your spending: Go through your credit union, bank or financial institution account statements to identify your spending patterns. Each expense item will have its own line in your budget, for example housing, groceries, utilities, transportation, investments, retirement savings, entertainment, clothing, etc. Also, identify and itemize your bills. Keep in mind that they may not be monthly expenses, for example insurance premiums come only once a year, so make sure to break them down into monthly amounts. Try to avoid guessing the amounts that you spend for each budget line. Be honest with yourself and aim to be as exact as possible.
• Stay organized: Save all your receipts and track them against your budget
• Be prepared: Allow for unplanned expenses like emergencies, occasional expenses like holidays, birthdays and other unforeseeables

To learn more about creating and sticking to a budget, speak to the manager of your credit union, bank or financial advisor. or, for immediate information, template and calculators visit Desjardins Group at www.desjardins.com

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