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Budget and debt – Part 2

by Tim St Vincent

Last month we chatted about how Canadians are having a tough time managing their relationship with money, budgets and debt. We chatted about the importance of budgeting and tracking your expenses. Let’s pick up that conversation where we left off, with one basic, important budgeting concept called “pay yourself first.”

I suggest starting off all budgets with this one basic behaviour. Pay yourself first. It is an easy idea but one that people often struggle with. It means just what is says. Before you start allocating your hard earned money to cover any expenses, cover your primary expense first – you. Think of your savings as an expense, and expense is nothing more than a bill, and we all want to do our best to pay our bills. This bill, though, is a bill you owe to yourself, to your future self, as these funds will go to your savings, and remember, we save money just so that we can spend money. So, just pay yourself (your savings expense) first.

To start, it doesn’t have to be a large amount. After all this is about starting a new behaviour, not making a fortune – not yet anyway! Start small, maybe just a few dollars here and there. Once you have this new behaviour well in hand, you can increase the amount until you hit a target amount. Ten per cent of your net pay is the recommended target. Right now 61 per cent of employers offer a pay yourself first program where they will divert part of your pay into a separate account. Another third are considering setting this up for their employees. Things just keeps getting easier and easier!

Another important thing to realize about budgets is that they are full of goals. Most people don’t get this at first. They think, “That doesn’t make any sense. My budget has things in it like pay the mortgage or rent, make the car payment, have money for groceries.” Exactly. Those are all goals. Your goal is to have enough money to pay the mortgage or rent, to have enough money to make the car payment etc. Along those lines it is also important to realize that goals cost two things: money and time.

Sometimes the money part of the goal can seem overwhelming. Maybe you want to save $2000 for a trip you want to take in a year. Well then, it is important to realize that there are four basic steps in budget and goal setting.

  • Identify the goal – go on a trip
  • Identify the financial cost –$2000
  • Identify the time cost – I want to go in one year, so the time cost is one year. We encourage you to think of the time cost in terms of paydays, so one year = 26 paydays. Then, so that the overall cost doesn’t become overwhelming break it down into paydays by dividing the financial cost ($2000) by the time cost (26 paydays in one year) and this will give you an amount of $77. So if you save $77 dollars every two weeks (paydays) then in one year you will have saved $2000 and you can afford to go on your trip!
  • Finally, just like the “pay yourself first” idea, it is important to set up a separate savings account to put these funds in to keep them safe from you!

Sometimes we’re our own worst enemies when it comes to savings. Putting your savings in a separate bank account – one that isn’t linked to your banking card, is a great way to save yourself from yourself. Keep using this method as a way to save, budget, and plan. 1. ID your goal. 2. Determine your financial cost for the goal. 3. Determine the time cost for the goal (in terms of paydays). Divide one into another, and 4. Set up an account just for these funds and set up and automatic transfer into this account.

If you can follow these basic steps and get past the fear that many of us have around budgeting, you can be successful at managing your debt.

Many Canadians – 38 per cent – rely on financial advisors and banks for advice. As a retired CFP I can state that there is value in this. A CFP would be an excellent choice to help with financial planning advice around retirement and other items. However their training is around how to make more money for you (a great goal!), how to help you invest your savings, and how to help you minimize your taxes (more great goals!). Unfortunately, their expertise is not in debt management. A better source for assistance would be an accredited credit counsellor. They specialize in only one thing: debt management. With about 50 per cent of the working country struggling with their debt, there’s no reason to be reluctant to ask for help.

Good luck to all in your financial journeys. May they be full of joy, happy experiences and successful savings!

Tim St Vincent is a retired CFP and is a Certified Educator in Personal Finance with the Credit Counselling Society, a non-profit organization. If you wish to contact the society for further information, assistance or to attend a webinar, please call 1-888-527-8999 or visit or

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