How to make a personal budget

28 March 2024 by National Bank
Making a Budget

Making a personal budget allows you to better understand your spending habits and make adjustments as needed. Beyond structuring your finances, a good budget will help you prepare for the unexpected and save money for the goals that are important to you. Here’s how to make a budget in six simple steps:

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1. Getting started with making a budget

The first thing to do is to find the budgeting tool that's right for you. Online budget calculators are available, like the ones provided by the federal government (link to external site) and National Bank.

These will make the work easier, since nearly all categories of expenses are already included and the calculations are performed automatically. Otherwise, you can use a spreadsheet to create your annual budget.

Some mobile apps allow you to monitor your budget very closely by syncing up automatically with your bank account. They make it possible to create a personalized budget based on your transaction history.

The important thing is to adopt the tool you're most comfortable with.

Preparing your budget starts with your financial statement in order to get a clear overview of your personal finances.

Of course, your advisor is always available to guide you through this process. They can also help explain certain concepts you’re having trouble with or provide you with documentation.

2. Entering your income in your budget

Write down your net monthly income, meaning your salary after source deductions. This is the actual amount deposited in your bank account. Usually, this amount shouldn’t vary. To calculate it precisely, consult your pay stub and your last income tax statement.

You may have other sources of income, such as: 

  • Tips
  • Commissions
  • Investment income
  • Support payments
  • Child benefits
  • A pension
  • Bonuses

These amounts appear under "deposits" on your bank account statement, except for cash tips. If you receive such income, set up an entry for it.

3. Entering your expenses in your budget

Enter all of your expenses. A good personal budget includes three distinct spending categories.

Fixed expenses recur monthly and don't vary much.

They include:

  • Rent or mortgage payments
  • Power bill
  • Internet bill
  • Mobile phone bill
  • Transportation (car payment, gas, monthly public transit passes)
  • Debt repayment
  • Medication
  • Life and critical illness insurance
  • Disability insurance and general fees

Variable expenses are those that change from month to month, such as:

  • Groceries
  • Outings and restaurants
  • Entertainment and subscriptions
  • Shopping
  • Vacations
  • Health and beauty (pharmacy, hairdresser, optometrist, dentist and other medical fees)

Infrequent or annual expenses are often underestimated, but they should still be planned for in your budget. To estimate the total, look at your receipts from the previous year. For example, think about:

  • Vehicle registration fees
  • Annual public transit passes
  • Annual fees for a professional association
  • Car or household repairs

Pro tips:

  • To calculate your expenses, a credit card statement can be a valuable source of information. You'll get a better idea of where your money is going.
  • For even more detailed information, keep your receipts. You'll be able to see how much you spend on groceries, school supplies and medication purchased from one or several stores.
  • Don't forget about small cash purchases. These recurring expenses can have a big impact on your budget over time. Your $5 daily latte adds up to hundreds of dollars less in your pocket at the end of the year.
Icône de deux mains qui se serrent

Want to learn some new savings tips? Read our article: 35 tips to help you save money and optimize your budget.

4. Allocating funds for savings and an emergency fund

You should put 10% to 20% of your budget toward savings. It all depends on your financial situation and objectives.

To make a sound personal budget: pay yourself first. This means that before you start putting money towards other expenses, you should dedicate an adequate amount to your savings. This will help give you peace of mind and make it possible to meet your goals, whether you want to buy a second home or install an inground pool.

An unexpected event, such as losing your job, could drastically affect your income and your budget. That's why it's so important to build an emergency fund. You should set aside the equivalent of three to six months' worth of expenses rather than income.

5. Analyzing your budget

Subtract your total expenses (fixed and variable) from your total income. You'll come up with your discretionary income.

If the result is negative, look for some areas where you can reduce your expenses.

Are you consistent when it comes to financial management? Do you tend to come up short in certain periods of the year, such as during the holidays?

This exercise will help you understand your spending habits and make adjustments as needed.

Icône d'ampoule avec un signe de dollars à l'intérieur

To learn more about drawing up a budget for your family, check out our article: "Household budget planning: indispensable tips."

6. Following up on your budget

Make it a habit to update your personal budget as regularly as possible, whether you're using an app or a spreadsheet.

Enter your expenses as they come up to avoid seeing it as a chore at the end of the month. Compare your initial budget to your actual expenses.

If a major event in your life requires you to rethink your financial situation and budget, schedule an appointment with a personal financial advisor as soon as possible.

Remember that the goal of a budget is to help you ensure your total income is greater than your expenses.

Here are some tips that can help in specific situations:

Renovating your home

Making a renovation budget could help you save thousands of dollars.

First, figure out which renovations could bring you a better return on your investment. Example: the kitchen. Next, try to save money on everything you can control. Choose less expensive materials or do some of the work yourself.

Planning a wedding

A wedding can quickly turn into a debt that you'll end up dealing with for years.

To avoid nasty surprises, start planning 9 to 12 months before the big day and make smart choices, especially when it comes to the following aspects:

  • Bar service
  • Music
  • Hairdresser
  • Dress
  • Flowers
  • Food
  • Photographer

Because there are always unexpected surprises, plan for a cushion equal to about 5% to 10% of your total budget.

Having a baby

Having a baby can take up 20% of your family budget. Needless to say, you can plan for this. Don't forget about:

  • Furniture
  • Decorations
  • Maternity clothes

Think about opening a Registered Education Savings Plan (RESP) to save for your child's future studies. This plan gives you access to a number of tax benefits and subsidies.

Planning a vacation

Ready to jet off for your dream vacation? Even though you've saved up for this long-awaited break, you may have forgotten to budget for non-essential expenses once you reach your destination.

Be sure to add some room in your budget for restaurants and souvenirs.

Completing your education

If you're in school, you probably have limited financial resources. You'll need to stick to your student budget to cover all your school-related expenses.

If your income is insufficient, you could get help from private or government loans and bursary programs, or take out a student line of credit from your financial institution.

A personal budget is a highly effective tool that will help you save money, prepare for the unexpected and achieve your goals. It will also help you correct your course if you see you're spending more than you should.

- You asked: “How do I make a personal budget?”




I’ll explain faster than I can do 20 push-ups.


A budget can help anyone understand their spending habits, avoid debt, prepare for emergencies and reach their financial goals.


- One!

- Finding a tool that helps you organize your budget can be a big help.

It can be anything from an Excel spreadsheet to an app that you download on your phone.


- Two!

- Identify all your sources of income.

Use your bank statement to identify precisely how much money you make.

You could add up all your deposits, and that’ll tell you how much you have coming in every month.


Don’t be lazy!

Sorry, I’m talking to myself.


- Three!

- A good personal budget includes three spending categories.

Fixed expenses, that’s like your rent or your phone bill.

Variable expenses.

That’s groceries, or restaurants or shopping.

And infrequent or annual expenses like insurance, or your driver’s licence renewal and your annual ski pass.

- Four!

- Experts typically recommend putting 10% to 20% of your gross income towards savings.

Now I know, I know.

That might be painful at first, but no pain no gain!


- Easy for you to say.



- When you deduct expenses from income, you’ll find out if you’re at a deficit or not.

If you are, you might need to make a few cuts to your budget.

Maybe you’re like me and you spend way too much on stylish activewear.




If you have a deficit, it’s easier to cut down on variable expenses like restaurants or shopping.

But if you have any money left over – you can pay off some debt or put some into savings in case an emergency comes up.

Now that you know how to do it, stay on top by keeping track of your budget month to month.

It’s all part of getting into great shape... financially.

I think I’m done.

How about you?


- Only one left!


- You wish.

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Whether you're working, studying or taking a year off, NOW pay no monthly fees if you're 18 to 24