Canadians are worried about their personal finances and have good reasons for it. According to a recent poll, the average Canadian spends 10 to 15 hours per week stressing about their finances.
The results show that 44% of Canadians are concerned with how to pay for daily expenses. Nearly 40% of citizens also worry about paying down debt and saving for emergencies.
Inflation is one major reason for the added worry. There is an ongoing inflation crisis and Canadians are seeing their grocery prices increase by more than 10%.
Calculating your average monthly expenses in the formulation of a budget is one way to ride out these difficult times. Read on to learn how to budget your fixed and variable expenses. Explore topics such as developing a successful budget and how to track monthly expenditures.
Why Is a Personal Budget Important?
For the vast majority of people, tracking expenses is the only way to stay out of debt. Most are aware of the money coming in but do not have the discipline to check what goes out. The truth is that your morning lattes and weekend shopping sprees add up quickly.
The average Canadian is swimming in debt. In the 35 to 44-year-old age group, the average person has over $105,000 in debt.
Many assume that financial issues decline over time as people are given the opportunity to earn more money and equity. However, the 45 to 54-year-old age bracket fares worse than younger Canadians. This age group has more than $130,000 in debt.
Developing a personal budget is one of the best ways to combat debt. Here you can find areas of improvement and where to achieve cost savings. Also, you can use these cost savings to pay down debt and put yourself in a better financial position.
How to Calculate Average Monthly Expenses
Do you earn enough income to cover all your fixed and variable monthly expenses? It is hard to tell without a process in place for tracking expenditures.
Some expenses are easy to check while others are more difficult. Continue reading for a breakdown of fixed and variable expenses.
Fixed expenses are the easiest to track. They occur on a routine basis and the amount is fixed for at least a year.
Your monthly rent is a good example. Before moving in, you sign an agreement to pay a specific amount per month for a set term. This amount may change when the lease is renewed, but it is fixed for a set period of time.
If you have a mortgage, your monthly payment may be fixed as well. This depends on whether you have a fixed interest rate. Those with a variable interest rate pay a different amount based on market conditions.
Car payments are another example of a possible fixed expense. Utilities also have the potential to be a fixed amount. Cell phone and internet bills do not typically change unless you have an introductory rate that is expiring.
Energy bills can be fixed if the homeowner wants them to be. You can contact your electricity or natural gas provider and ask them to go on a budget plan. This evenly spreads energy costs over a 12-month period to make it easier to pay.
Today, consumers are also paying for many smaller fixed expenses. This includes subscription fees for streaming services and software applications.
Many Canadians have taken out loans to continue their lifestyle, pay for unexpected expenses, or pursue an improvement in quality of life. These include quick cash loans, home equity, or college debt.
As long as you secure a fixed interest rate, your monthly payments do not change over the loan term. Those that opt for a variable interest rate will see their payments change each month based on market conditions.
Variable expenses are harder to check. This includes costs incurred that vary over a month-to-month basis. Entertainment, food, and gasoline are examples of variable expenses.
They vary based on your consumption levels. The more that you go out to the pub, the higher your entertainment costs are going to be. The same is true for gasoline and the number of miles that you are driving.
Variable expenses are usually the easiest to target and reduce. A thorough review of your monthly expenditures is likely to reveal wasteful spending.
After identifying your excessive variable expenses, you may decide to eat out less or make your own coffee in the morning.
There are budgeting tips that are proven successful for many Canadians. One effective strategy is to set an income percentage for your variable expenses.
For instance, 25% of your income is dedicated to paying for variable expenses. This may help you limit monthly spending and cut wasteful spending.
How to Calculate Your Average Monthly Expenses?
There are many different ways to calculate an average. The more data that you have, the more accurate your calculation is going to be.
For specific expenses, you may decide to take an average of 6 months’ worth of bills. Then add up the average calculation for each individual expense to see how much you spend per month.
Others like to record how much they spend in total for the month. Then calculate an average based on 6 to 12 months of data. This is more of a top-level approach and may have a higher margin of error.
There are other methods of central tendency that consumers like to take. Some take the median recorded value, which is the mid-point of a sample. Others may use the highest recorded monthly expenses to err on the safe side.
Your Guide to Personal Budgeting and Calculating Average Expenses
You are now ready to take control of your personal finances. Without paying close attention, you run the risk of spending more than you bring in. This leads to growing debt and reduced savings.
Monitoring your average expenses allows you to find wasteful spending and get ahead. If you are interested in taking a quick cash loan to pay off an unexpected expense, contact us today to get started.