A budget is a plan that can prioritize your money. It allows you to see how much money you’ll bring in each month (income) and where you plan on spending (expenses) your money. It also allows you to understand where you may be able to decrease budget within some categories such as living expenses or increase your budget in others categories such as savings. Most importantly, it helps set a plan to not spend above your means. 

A budget can also help you see what percentage of your income you’re spending within the different expense categories. Below we break down the different expense categories and the recommended percentage of income you should be spending within each.

Housing

We recommend keeping your housing expenses to 30-40% of your income. Housing expenses include your mortgage/rent, condo fees, property taxes, insurance, maintenance and utility payments.

One popular rule of thumb says that you should set aside 1% of your home's value each year for ongoing maintenance (vent cleaning, paint refresh, etc.). For example, if your home is worth $250,000, you should budget $2,500 each year for maintenance. We recommend setting money aside each month into a savings account to cover these maintenance costs when they occur. Doing so, will help you be prepared for those larger expenses and not be ‘scrambling’ to find money within your budget to cover a large expense.

Though many of these expenses are fixed, meaning you can’t change the expense amount, there are a few ways you can reduce these expenses. Consider reducing the amount you use/spend on utilities. This can include installing a rain barrel to collect rainwater to water your yard or trying out one of these eight energy-saving tips.

Transportation

We recommend keeping your transportation expenses to 10-20% of your income. Expenses in this category include vehicle loans, gas, insurance and maintenance.

Some ways to reduce expenses in this category include using city transit, carpooling or saving on gas by using GasBuddy.com to tell you where the nearest and cheapest gas stations are.

Living Expenses

For living expenses, we recommend keeping to 20-30% of your income. These expenses include childcare, groceries, eating out, entertainment, phone, personal care, clothing, gifts, donations, medical, etc. Though there are a lot of expenses in this category, many of these are variable expenses meaning they can be adjusted based on your financial situation.

You may not be able to change your childcare fees, but expenses related to groceries, eating out, entertainment, phones, etc. can be adjusted. Things such as cooking at home vs. going out to eat or picking a smaller cable package or cell phone package are all ways to help reduce these expenses.

Budgeting doesn’t mean you can’t have fun but instead helps you be aware of how you’re spending your money and to treat yourself in moderation and within your means. Here are a few creative alternatives to consider to help keep expenses down within these categories.

Debt Repayment

If you have debt, such as a balance on a line of credit or credit card, we recommend keeping your debt repayments at 10-20% of your income. 

It may be tempting to reduce expenses in this category before others when adjusting your budget, but we recommend trying to reduce elsewhere, like your living expenses before adjusting these expenses. Setting 10-20% of your income towards paying off your debt sets a plan in action for eliminating your debt and helps towards your financial freedom.

It’s important to always budget money to ensure your debt’s monthly minimum payment is covered and then apply extra money to your debt to reduce the amount owed even faster. For additional advice and tips on eliminating debt, we recommend checking out our Eliminating Debt blog.

Savings

For savings, we recommend putting 10% or more of your income into savings each month. This includes savings for your goals (short-term, intermediate and long-term), retirement, emergency savings, RESPs and more.

This category is truly about being sure to pay yourself first. Not sure what we’re talking about – discover more here.


To make budgeting easier for you, we recommend checking out our online Budget Calculator. All you have to do is insert your monthly income, expenses and savings and you’ll get a clear picture of where you are financially. You’ll also be able to see how your expenses fit within the recommended percentages we just discussed.

At the end of the day, setting a budget can help you stay focused on what’s important and give you guidelines on how you’ll spend your money. As for ensuring you stick to this budget though, that will be up to you.