Rent/mortgage payments, student loan payments, internet services, and insurance are examples of expenses that automatically fall into this category

We all have the best intentions when creating a budget, but when money gets tight, budgeting can become much more difficult. Although budgeting should be a tool available to everyone, budgeting tips often cater to people with “middle class” incomes. What if your mandatory expenses eat up most-or all-of your income? What if an unexpected blip in your financial situation (like a car repair or a missed week of work) could be enough to derail you completely?

If it feels like all you can do is make sure you have enough to cover your bills, youre not alone. Its still possible to use budgeting to help increase your financial security, plan for the future, and reach your goals, even on a limited income. Heres how to get started:

Rethinking budgeting

If youve spent any time researching budgeting strategies, youve probably come across many tips and tricks that dictate that your “needs” (such as rent, groceries, transportation) should account for roughly 50 percent of your income.

However for many Albertans, only spending 50 percent on “needs” may not be realistic. Sometimes meeting your households needs consumes all of your income. Unexpected expenses can even make determining the difference between a “want” and a “need” difficult to discern. For example, although many people would automatically categorize new shoes as a “want”, if you need new shoes to be presentable at work, it changes the equation.

High expense or low income budgeting

So lets try a new set of budgeting categories, based on your real monthly spending: fixed expenses, variable expenses, and savings.

Fixed expenses are expenses that are relatively consistent month-to-month. Other expenses (like groceries, clothing, electricity and phone bills) might fall into the fixed expense or the variable expense category, depending on the consistency of your lifestyle.

Variable expenses change based on the month. And as we all know, some months are harder than others. While some variable expenses are discretionary (like concert tickets or a night out at the bar), others (like vet bills) are not.

Savings are personalized around your financial goals. This category includes any money you put into a savings account, registered savings plan, investment account, or cookie jar rather than spending it on your immediate needs and wants. By contributing money to a savings or investment program like ATB Prosper, you are investing in yourself and your future.

We have created a budgeting worksheet to help you determine how much youre spending on these three categories. Download the interactive sheet here to calculate and categorize your monthly expenses and learn more about your spending habits. We recommend completing the worksheet before moving on so that you can better understand how the advice below relates to your personal financial situation.

Gaining financial confidence

Now that you have a clear idea of where your money is currently going, you can look at two important and related questions:

1. Are there areas where you can cut down on either fixed or variable expenses?
2. If yes, where could that money be put to better use?

For some people, the money they refrain from spending every month is best put toward a savings or investing goal (like a more reliable vehicle, higher education, retirement, a couch). For some, that money is more useful as a way to increase the rate at which they can pay off high-interest debt (like a payday loan or credit card). Sometimes, the money saved on one spending item (like a streaming service) needs to go toward another item (like prescription medication). And for many people, building an emergency fund is a top priority.