Home » Count Your Beans » Build A Budget

Manage your money better with a budget

Building a budget is the first step toward becoming a better money manager. It’s a monthly snapshot of your income minus your expenses.

Believe it or not, many people don’t know how much money they earn or how much they spend each month.

That’s why we create budgets. It’s a financial exercise that sometimes surprises people – even shocks them, when they discover the amount they spend each month. It also inspires them to change their financial habits.

Don’t be shy about this exercise. Figure out the total amount you earn and spend each month. Drill down to the last dollar. It’s important!

Before you get your bills out, learn more about budgeting below.

If you think you’re ready now – Click here to Build Your Budget

KOFE Break!

Before we get started, take this quick quiz to see how much you know about the basics of budgeting. It will help gauge the amount of time you’ll need to take on this section.

Build a Budget

What are the three types of expenses you can have in your budget?

A) Bills, Wants, Needs

B) Fixed, Flexible, Discretionary

C) Pay now, Pay next month, Pay never

D) Flexible, Floating, Fixed

B) Fixed, Flexible, Discretionary

How much money should you have in savings, at a minimum?

A) Whatever is in my pocket

B) At least three to six months of budgeting expenses

C) At least 50% of your yearly net salary

D) At least 50% of your gross monthly income

B) At least three to six months of budgeting expenses

Calculating your income for your budget

Find a quiet spot and gather all sources of income. If you’re married, include your spouse’s wages. If you earn money through investments, have a part-time job, receive alimony, have kids that contribute to the family bills, add it all in. Remember to include everything if you want an accurate budget. The total is called your gross income.

Track your spending

Once you understand how much you earn each month, it’s time to track your spending.

For one month, collect all your receipts and statements, including ATM, restaurant, gas, subscription services, and miscellaneous expenses. Write everything down.

Every cent counts. Don’t forget to include expenses that are easily forgotten such as:

  • Allowance for the kids
  • Money spent on morning coffee or afternoon energy drinks
  • The quick lunch at a fast-food restaurant
  • Dry cleaning
  • Alcohol and cigarettes
Track your Spending

No expense is too small. Don’t forget, this is a monthly snapshot, so you can always come back to re-calculate this when your expenses might change (such as during the holidays).

By the way, many people often ignore certain expenses. It may be because they feel uncomfortable about excessive spending or want the spending to remain private. If you want an accurate budget, track everything and be honest with yourself.

Understanding the three types of expenses in your budget

Keep in mind that there are three types of expenses you’ll want to think about in your budget – Fixed, Flexible, and Discretionary.

This separation reveals where your money is being spent and pinpoints the areas where you can cut spending if necessary. The three types include:


These are usually necessary expenses and remain fixed from month-to-month. They include car payments, mortgage, rent and even expenses such as condo fees.


These expenses change from month-to-month but are mostly necessary – although you can easily lower them.

They include grocery bills, utilities, cable and cell phone bills.


Items you don’t necessarily need to survive, but still buy them anyway because you want them.

These include gym memberships, dining out, theatre tickets, morning coffee, and more. They may also include unexpected costs, such as home repairs.

Continue Building Your Budget Here

KOFE Break Round Two

What does the financial term "upside down" mean?

A) You’re not right side up

B) Your gross income is more than your total expenses

C) Your total expenses are more than your gross income

D) Your finances are in perfect shape

C) Your total expenses are more than your gross income

Once you build a budget, what should you do after a few months?

A) Stop using the budget

B) Build a whole new budget

C) Try using someone else’s budget

D) Check to make sure it’s still accurate

D) Check to make sure it’s still accurate

Learning how to balance your budget

After you total your monthly expenses, simply subtract them from your gross income. The money remaining is called your net income.

For example, if you have a gross income of $2,000 and your expenses are $1,500, then your net income is a surplus of $500 ($2,000 - $1,500 = $500). If you receive four paycheques a month, that means you only have $125 to budget for retirement, an emergency fund or another goal per cheque.

Upside down

Upside down refers to the situation people find themselves in when they spend more than they earn. If your total expenses are more than your gross income, you’re upside down and in a deficit. That’s trouble.

Before you go any further, learn how to Reduce Your Expenses.

If you need help, don’t be afraid to contact our team for support

Don’t forget to budget in savings

Most people forget to create an entry for savings in their budget.

You should set aside a minimum of three to six months of budgeted living expenses in a separate savings account.

Figure out how much money you can save each month and set up an account that automatically takes that money from your income deposits. It’s quick and painless and you don’t need to start with a huge amount. If you don’t, there’s a good chance you’ll end up with no savings.

Remember to re-evaluate

After a few months of budgeting, compare your actual spending with what you budgeted. If some expenses have increased, make the adjustments. Your budget is never set in stone – it changes just like you do.


After every month or two, you should re-evaluate it. Especially, if you know your expenses are changing based on the time of year – think the holiday season or back to school.

Expenses change quickly, and if you’re not diligent about adjusting them, the budget won’t be accurate. Budgeting takes some work, but in the end, you’ll get the rewards.

Take advantage of KOFE’s financial publications and videos to learn more and get more comfortable with your personal finances.

Take Me Back to My Budget