{"id":210,"date":"2023-08-27T05:22:15","date_gmt":"2023-08-27T09:22:15","guid":{"rendered":"https:\/\/pressbooks.bccampus.ca\/financialfreedomfortrades\/?post_type=chapter&p=210"},"modified":"2024-11-19T05:35:59","modified_gmt":"2024-11-19T10:35:59","slug":"importance-of-a-budget","status":"publish","type":"chapter","link":"https:\/\/pressbooks.bccampus.ca\/financialfreedomfortrades\/chapter\/importance-of-a-budget\/","title":{"raw":"Importance of a Budget","rendered":"Importance of a Budget"},"content":{"raw":"A [pb_glossary id=\"260\"]budget[\/pb_glossary] acts as the base economic blueprint to your financial journey.\u00a0 A budget fundamentally provides an outlook into the income and expenditures over a specific period of time, usually on a monthly or annual basis.\u00a0 Having an accurate budget is especially important to track, assess, and re-evaluate your financial status.\r\n\r\nThere are many benefits to keeping even a simplified budget:\r\n
    \r\n \t
  1. Preventing you from Spending Funds you Don\u2019t Have<\/strong> \u2013 With the use and availability of credit cards, it\u2019s very easy to spend money that you are not able to pay back in full at the statement due date.\u00a0 Keeping a budget allows you to review how much cash income you have received that month to keep spending habits within a limit.\u00a0 For trade apprentices, keeping a budget can stop overspending of funds greater than that actually received from student loans and grants.<\/li>\r\n<\/ol>\r\n
      \r\n \t
    1. Reality check <\/strong>\u2013 Many people have never created a budget, and are surprised to see their actual spending habits.\u00a0 Making a budget forces people to review expenses and set realistic spending and savings goals.\u00a0 The budget can easily show if one is living within their means.\u00a0 It is sometimes a hard reality check that one\u2019s financial health is not heading in a great direction.\u00a0 For trade apprentices, generating a budget can help predict the financing required for each level of technical trades training.<\/li>\r\n<\/ol>\r\n
        \r\n \t
      1. Assist in reaching long-term and short-term financial goals<\/strong> \u2013 Budgeting helps allocate funds towards certain goals and to tracking progress.\u00a0 Spending your entire paycheck makes it more difficult to save for long-term items such as purchasing a vehicle or putting a down payment on a principal residence.\u00a0 Having a budget can assist trade apprentices in projecting the cash inflows and outflows required as they complete their certification towards qualification.<\/li>\r\n<\/ol>\r\n
          \r\n \t
        1. Automate the savings process<\/strong> \u2013 With a budget, one can designate a certain amount or percentage of income directly to savings or reducing debt.\u00a0 Separating a specific savings amount away from [pb_glossary id=\"274\"]disposable income[\/pb_glossary] automatically allows an individual to begin to build regular savings or investment contributions.\u00a0 For trade apprentices, the budget can assist in forecasting when payments are due and how long it may take to pay back any student loans.<\/li>\r\n<\/ol>\r\n
            \r\n \t
          1. Be in a healthier position when emergencies arise<\/strong> \u2013 Unanticipated events may arise such as a car breakdown or required home repair.\u00a0 One can begin building an [pb_glossary id=\"276\"]emergency fund[\/pb_glossary] into their budget, by setting aside funds from each paycheck.\u00a0 Trade apprentices may find themselves changing employer sponsors or being laid off after a project is completed, so there is a gap in the expected earnings.\u00a0 Having an available emergency fund to make necessary unexpected financial payments will put you into a less stressful financial situation.<\/li>\r\n<\/ol>\r\n
              \r\n \t
            1. Review Financial Habits to Make Better Changes<\/strong> \u2013 Tracking expenses over a few months or year on year comparisons can show financial trends.\u00a0 Enhanced financial decisions and setting larger financial goals can be made from budget data.\u00a0 Trade apprentices can and should begin to increase financial goals as their income expands with increased experience in their trade.<\/li>\r\n<\/ol>\r\nOverall, having a budget provides a key starting point towards the journey towards financial freedom.\u00a0 The budget acts as a base in setting and attaining realistic financial goals, living within your means, planning for the future, and saving for the unexpected.\r\n\r\nThe Government of Canada \u2013 Financial Consumer Agency of Canada outlines increased information in regards to \u2018Making a Budget\u2019<\/em><\/a>.\r\n\r\n \r\n
              \r\n

              Example: Monthly Budget - Apprentice<\/strong><\/p>\r\n\r\n<\/header>\r\n

              \r\n\r\nJack is a glazier trade apprentice in the 4th year of training.\u00a0 Jack takes recent employment [pb_glossary id=\"278\"]paystubs[\/pb_glossary], bills, and [pb_glossary id=\"280\"]bank statements[\/pb_glossary] to enter data from the same month into the budget.\u00a0 Once all incoming funds and expenditures are listed, Jack allocates some funds to planning for his future.\u00a0 A sample budget for Jack in a month of work compared to a month while in technical training may be estimated as follows:\r\n\r\nMonthly Budget - Apprentice Working<\/span>\r\n\r\n\"Calculation<\/a>Monthly Budget - Apprentice Technical Training<\/span>\r\n\r\n\"Calculation<\/a>Jack\u2019s monthly budget should be adjusted as his financial needs are different in each month of apprenticing compared to being a full-time trade technical training student.<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n \r\n
              \r\n

              Tax Tip: Estimate Taxes into Budget<\/strong><\/p>\r\n\r\n<\/header>\r\n

              \r\n\r\nIt is recommended to include estimated taxes into your budget.\u00a0 Income taxes will form a significant portion of cash outflow straight off of the [pb_glossary id=\"282\"]gross income[\/pb_glossary] amount.\u00a0 Accounting for taxes will make the budget more accurate so that you can make better financial decisions.\u00a0 Certain grants and government payments (eg. Employment Insurance benefits) received by trade apprentices are taxable amounts.\u00a0 Taking taxes into consideration will prevent the likelihood that you have a significant surprise tax bill that won\u2019t be able to make payment for.\r\n\r\n<\/div>\r\n<\/div>\r\n \r\n\r\nTechnology Budget Tool Planners<\/span>\r\n\r\nOf course, there\u2019s an App for that!\u00a0 A [pb_glossary id=\"284\"]budget tool planner[\/pb_glossary] can come in many forms.\u00a0 Some are even compatible with an array of technology platforms.\u00a0 At its fundamental core, all budgeting tool planners perform similar calculations to track the estimated cash inflows and outflows over a specific time period usually a month.\u00a0 Using a mobile phone application or worksheet template to create a budget can provide a good financial overview very quickly.\r\n\r\n \r\n\r\nFinancial Consumer Agency of Canada - Government of Canada<\/strong>\r\n\r\nThe Financial Consumer Agency of Canada<\/a> has an online budget planner, in which data can be inputted directly and results can be saved, exported, or printed to portable document format (pdf).\u00a0 Using the Government of Canada\u2019s resource can provide you with guidelines with how your budget compares to the average Canadian.\r\n\r\n[caption id=\"attachment_313\" align=\"aligncenter\" width=\"626\"]\"Financial<\/a> Image Source: Financial Consumer Agency of Canada - Government of Canada[\/caption]\r\n\r\nBuddy<\/strong>\r\n\r\nBuddy<\/a> is another application that can help you set-up a budget and keeps track of expenses.\u00a0 An overview of your income, expenses, and savings can also be shared with other people such as family members or roommates.\u00a0 There are both free and paid versions of this application.\r\n\r\n[caption id=\"attachment_312\" align=\"aligncenter\" width=\"1247\"]\"Buddy<\/a> Image Source: Apple App Store Preview - Buddy[\/caption]\r\n\r\nBanking Apps<\/strong>\r\n\r\nMany large Canadian financial institutions will offer their own application for being a customer with them.\u00a0 These banking apps can show account balances, transactions, and bill payments.\u00a0 TD Bank offers a more detailed budget tool application called TD MySpend<\/a>, which will track spending habits, set financial wish lists, and categorize expenses.\r\n\r\n[caption id=\"attachment_315\" align=\"aligncenter\" width=\"1247\"]\"TD<\/a> Image Source: Apple App Store Preview - TD MySpend[\/caption]\r\n\r\n \r\n\r\nOther Canadian financial institutions such as Canadian Imperial Bank of Commerce (CIBC) offer CIBC CreditSmart and Bank of Montreal (BMO)\r\n\r\n \r\n\r\nThere are an abundant number of technology applications or spreadsheet versions that can assist in tracking expenses and producing a reasonable budget.\u00a0 It\u2019s not as important on which technology budget planning tool for you to use.\u00a0 It\u2019s much more vital to keep an accurate budget, review the data results, and allow the budget to shape better financial decisions and habits.\r\n\r\nA budget template (Excel) has been provided that includes common income and expense items for trade workers.\r\n\r\nChapter 02_Budget Template<\/a>\r\n\r\n ","rendered":"

              A budget<\/a> acts as the base economic blueprint to your financial journey.\u00a0 A budget fundamentally provides an outlook into the income and expenditures over a specific period of time, usually on a monthly or annual basis.\u00a0 Having an accurate budget is especially important to track, assess, and re-evaluate your financial status.<\/p>\n

              There are many benefits to keeping even a simplified budget:<\/p>\n

                \n
              1. Preventing you from Spending Funds you Don\u2019t Have<\/strong> \u2013 With the use and availability of credit cards, it\u2019s very easy to spend money that you are not able to pay back in full at the statement due date.\u00a0 Keeping a budget allows you to review how much cash income you have received that month to keep spending habits within a limit.\u00a0 For trade apprentices, keeping a budget can stop overspending of funds greater than that actually received from student loans and grants.<\/li>\n<\/ol>\n
                  \n
                1. Reality check <\/strong>\u2013 Many people have never created a budget, and are surprised to see their actual spending habits.\u00a0 Making a budget forces people to review expenses and set realistic spending and savings goals.\u00a0 The budget can easily show if one is living within their means.\u00a0 It is sometimes a hard reality check that one\u2019s financial health is not heading in a great direction.\u00a0 For trade apprentices, generating a budget can help predict the financing required for each level of technical trades training.<\/li>\n<\/ol>\n
                    \n
                  1. Assist in reaching long-term and short-term financial goals<\/strong> \u2013 Budgeting helps allocate funds towards certain goals and to tracking progress.\u00a0 Spending your entire paycheck makes it more difficult to save for long-term items such as purchasing a vehicle or putting a down payment on a principal residence.\u00a0 Having a budget can assist trade apprentices in projecting the cash inflows and outflows required as they complete their certification towards qualification.<\/li>\n<\/ol>\n
                      \n
                    1. Automate the savings process<\/strong> \u2013 With a budget, one can designate a certain amount or percentage of income directly to savings or reducing debt.\u00a0 Separating a specific savings amount away from disposable income<\/a> automatically allows an individual to begin to build regular savings or investment contributions.\u00a0 For trade apprentices, the budget can assist in forecasting when payments are due and how long it may take to pay back any student loans.<\/li>\n<\/ol>\n
                        \n
                      1. Be in a healthier position when emergencies arise<\/strong> \u2013 Unanticipated events may arise such as a car breakdown or required home repair.\u00a0 One can begin building an emergency fund<\/a> into their budget, by setting aside funds from each paycheck.\u00a0 Trade apprentices may find themselves changing employer sponsors or being laid off after a project is completed, so there is a gap in the expected earnings.\u00a0 Having an available emergency fund to make necessary unexpected financial payments will put you into a less stressful financial situation.<\/li>\n<\/ol>\n
                          \n
                        1. Review Financial Habits to Make Better Changes<\/strong> \u2013 Tracking expenses over a few months or year on year comparisons can show financial trends.\u00a0 Enhanced financial decisions and setting larger financial goals can be made from budget data.\u00a0 Trade apprentices can and should begin to increase financial goals as their income expands with increased experience in their trade.<\/li>\n<\/ol>\n

                          Overall, having a budget provides a key starting point towards the journey towards financial freedom.\u00a0 The budget acts as a base in setting and attaining realistic financial goals, living within your means, planning for the future, and saving for the unexpected.<\/p>\n

                          The Government of Canada \u2013 Financial Consumer Agency of Canada outlines increased information in regards to \u2018Making a Budget\u2019<\/em><\/a>.<\/p>\n

                           <\/p>\n

                          \n
                          \n

                          Example: Monthly Budget – Apprentice<\/strong><\/p>\n<\/header>\n

                          \n

                          Jack is a glazier trade apprentice in the 4th year of training.\u00a0 Jack takes recent employment paystubs<\/a>, bills, and bank statements<\/a> to enter data from the same month into the budget.\u00a0 Once all incoming funds and expenditures are listed, Jack allocates some funds to planning for his future.\u00a0 A sample budget for Jack in a month of work compared to a month while in technical training may be estimated as follows:<\/p>\n

                          Monthly Budget – Apprentice Working<\/span><\/p>\n

                          \"Calculation<\/a>Monthly Budget – Apprentice Technical Training<\/span><\/p>\n

                          \"Calculation<\/a>Jack\u2019s monthly budget should be adjusted as his financial needs are different in each month of apprenticing compared to being a full-time trade technical training student.<\/span><\/p>\n<\/div>\n<\/div>\n

                           <\/p>\n

                          \n
                          \n

                          Tax Tip: Estimate Taxes into Budget<\/strong><\/p>\n<\/header>\n

                          \n

                          It is recommended to include estimated taxes into your budget.\u00a0 Income taxes will form a significant portion of cash outflow straight off of the gross income<\/a> amount.\u00a0 Accounting for taxes will make the budget more accurate so that you can make better financial decisions.\u00a0 Certain grants and government payments (eg. Employment Insurance benefits) received by trade apprentices are taxable amounts.\u00a0 Taking taxes into consideration will prevent the likelihood that you have a significant surprise tax bill that won\u2019t be able to make payment for.<\/p>\n<\/div>\n<\/div>\n

                           <\/p>\n

                          Technology Budget Tool Planners<\/span><\/p>\n

                          Of course, there\u2019s an App for that!\u00a0 A budget tool planner<\/a> can come in many forms.\u00a0 Some are even compatible with an array of technology platforms.\u00a0 At its fundamental core, all budgeting tool planners perform similar calculations to track the estimated cash inflows and outflows over a specific time period usually a month.\u00a0 Using a mobile phone application or worksheet template to create a budget can provide a good financial overview very quickly.<\/p>\n

                           <\/p>\n

                          Financial Consumer Agency of Canada – Government of Canada<\/strong><\/p>\n

                          The Financial Consumer Agency of Canada<\/a> has an online budget planner, in which data can be inputted directly and results can be saved, exported, or printed to portable document format (pdf).\u00a0 Using the Government of Canada\u2019s resource can provide you with guidelines with how your budget compares to the average Canadian.<\/p>\n

                          \"Financial<\/a>
                          Image Source: Financial Consumer Agency of Canada – Government of Canada<\/figcaption><\/figure>\n

                          Buddy<\/strong><\/p>\n

                          Buddy<\/a> is another application that can help you set-up a budget and keeps track of expenses.\u00a0 An overview of your income, expenses, and savings can also be shared with other people such as family members or roommates.\u00a0 There are both free and paid versions of this application.<\/p>\n

                          \"Buddy<\/a>
                          Image Source: Apple App Store Preview – Buddy<\/figcaption><\/figure>\n

                          Banking Apps<\/strong><\/p>\n

                          Many large Canadian financial institutions will offer their own application for being a customer with them.\u00a0 These banking apps can show account balances, transactions, and bill payments.\u00a0 TD Bank offers a more detailed budget tool application called TD MySpend<\/a>, which will track spending habits, set financial wish lists, and categorize expenses.<\/p>\n

                          \"TD<\/a>
                          Image Source: Apple App Store Preview – TD MySpend<\/figcaption><\/figure>\n

                           <\/p>\n

                          Other Canadian financial institutions such as Canadian Imperial Bank of Commerce (CIBC) offer CIBC CreditSmart and Bank of Montreal (BMO)<\/p>\n

                           <\/p>\n

                          There are an abundant number of technology applications or spreadsheet versions that can assist in tracking expenses and producing a reasonable budget.\u00a0 It\u2019s not as important on which technology budget planning tool for you to use.\u00a0 It\u2019s much more vital to keep an accurate budget, review the data results, and allow the budget to shape better financial decisions and habits.<\/p>\n

                          A budget template (Excel) has been provided that includes common income and expense items for trade workers.<\/p>\n

                          Chapter 02_Budget Template<\/a><\/p>\n

                           <\/p>\n

                          definition<\/span>