Just out of high school? Build your first adult budget.

You have graduated from high school after spending 18 years living with your parents and now you’re ready to explore the world. Basic life skills are more complex than just keeping yourself alive after you leave home. One of the basic life skills is financial responsibility. In our current education environment, financial skills are not taught to the regular body of students, resulting in them being unprepared to navigate daily life in a financially secure way. It is normal for you to feel anxious about expenses and how you are going to afford them.

Happy man paying bills on his laptop

Creating strong budget habits early in adult life is essential to building a pathway to financial independence. To start, you will need to learn to create a budget.

A budget is a plan to manage your money so you know how much you earn, how much you spend, and what you spend your money on.

Steps to create a budget

  1. Set financial goals
  2. Your goals will depend on your personal financial situation. It could be anything from purchasing a vehicle, saving for college tuition, or moving into your own apartment. When setting goals, they must be SMART — Specific, Measurable, Achievable, Realistic, and Time-Framed.

    For example, you want to save money for a vehicle. This goal is vague and doesn’t provide any details. If your goal is to save $3,000 in 12 months to purchase a vehicle, then it’s specific, you know exactly what you are saving for, how much, and for how long.

    Setting financial goals will put your budget into action.

  3. Create a budget
  4. Use a budget template from the website listed below to plan your budget. Plan your income and expenses for a period of one month. Be realistic and honest as possible in your budget estimates and include the unexpected expenses and your goals.

  5. Track your expenses
  6. Keep track of your expenses for at least 1-2 months, from coffee to groceries to rent to eating out. Every dollar you spend affects your budget. This will show you where you are spending your money. You can track your expenses either with a booklet, spreadsheet, or apps available on iOS and Android. It’s important to find the one that works best for you so you can stick to it.

  7. Compare your budget with your real expenses
  8. At the end of the month of tracking your expenses, compare it to your budget that you created. The difference between the two will indicate whether you underestimated or overestimated your budget items. Then review each item to determine if it is within the average guideline which is provided by the Financial Consumer Agency of Canada website, and you can make the necessary corrections if needed.

  9. Follow up on your financial situation and review your budget
  10. Review and evaluate your budget on a regular basis especially when there are changes in your financial situation such as loss of employment, birth of a child, or change of income. Does your budget still allow you to meet your needs and reach your goals? Do you need to increase or decrease certain budget items? Your budget should be flexible so it can adapt to any situation.

Forming good habits

When your budget is all prepared, be disciplined to stick to it and improve it as you go. Some tips to help with following your budget:

  1. Keep all your receipts and bills
  2. Spend within your budget
  3. Update your budget with any changes, such as a bill increase, inflation, pay raise, etc.
  4. Compare your budget to your actual expenses at the end of each month

If you follow the above tips and make it a habit, you are more likely to stay on track.

Here are some useful links to educate yourself on money-related topics and obtain helpful tools for budgeting:

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