Making and sticking to a budget looks different for everyone—and one often-overlooked factor that changes the budgeting equation is how much money you make. Although budgeting is a tool available to everyone, budgeting advice often caters to people with significant disposable income. But what if your basic expenses consume 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) is enough to put you in a precarious position?

It’s still possible to use budgeting to help increase your financial security, plan for the future and reach your goals, even on a limited income. We’ve revised some traditional budgeting advice to make it more realistic—and more useful—for you:

Rethinking budgeting

If you’ve spent any time researching budgeting strategies, you’ve probably come across the idea that you should spend roughly 50 per cent of your income on your basic needs (such as rent, groceries and  transportation).

For many Albertans, this calculation is simply not realistic. Meeting your household’s basic needs may consume all of your income. Unexpected expenses can make it difficult to determine the difference between a “need and a “want”.

Beyond “wants” and “needs”

Rather than dividing spending into “wants” and “needs”, let’s use a new set of budgeting categories, based on your real monthly spending: fixed expenses, variable expenses and savings.

Fixed expenses are relatively consistent month-to-month. Rent/mortgage payments, loan payments, internet services and insurance are examples of expenses that automatically fall into this category. Other expenses (like groceries, childcare, 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. While some variable expenses (like concert tickets or a night out) are discretionary, others (like vet bills, or new work shoes) are not.

Savings are based on your financial goals. This category includes any money you put into a savings account, registered savings plan, investment account, or separate envelope rather than spending it on your immediate needs and wants. By saving through a program like ATB Prosper, you are investing in yourself and your future.

Use our interactive budgeting worksheet 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

Once you have a clear idea of where your money is currently going, you can look at two important, 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, a home, 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.

The most important thing is that you feel confident in how you’re choosing to allocate your limited resources. A flexible, personalized budget is a great way to make those choices more clear.

Revamping your budget

Fixed expenses

Fixed expenses can be difficult to cut back on because they are often also essential expenses. If, however, you are able to cut down on even one of your fixed expenses, you can immediately funnel that money into an automatic savings deposit or debt payment, without altering your remaining available income.

Here are a few ways to cut down on common fixed expenses:

• Move to a new place that offers lower rent, rent out your basement, explore co-op housing, or get a roommate.
• Shop around for better prices and change your internet, phone or insurance provider.
• Unsubscribe from memberships, subscriptions and streaming services that do not bring you joy.
• See if there are services (such as wifi, subscription software or streaming services) you can share with a friend, partner or neighbour.
• Explore whether it makes more financial sense to simply pay for more gigs on your cell phone plan than keeping wifi.
• Purge clutter you are paying to store.
• Trade childcare with a friend or neighbour.
• Transfer high-interest debt to a lower interest loan or line of credit.

Variable expenses

The process of adjusting your variable expenses requires you to make daily decisions about when and how to spend. Although variable expenses are more likely to be discretionary, the largest variable expenses are often emergencies—unexpected changes to health, employment status, housing or transportation options.

In fact, one of the best ways to reduce the toll of variable expenses on your monthly budget is to create an emergency fund to cover things like medication, time off work, childcare, appliance replacement, intermediate accommodations, traffic tickets and vehicle repair.

A few more suggestions:

• Be more efficient with your utility usage. It’s good for your wallet—and the planet.
• Be aware of how your friends, family and colleagues influence your spending. You have the right to say no. Giving in to pressure to spend on food, gifts, personal loans, events and alcohol will decrease your financial confidence—and the amount of leeway in your budget.
• If your budget is tight, try examining three month’s worth of financial statements to determine how much you are spending and where.  A financial advisor can also do a review of your account and help identify opportunities to save.
• Try sticking to a predetermined spending cap on categories like clothing, technology and coffee. You can use budgeting apps to help you. One advantage of a budgeting app is that it makes it easier to keep track of spending on credit cards.
• Parking, taxis, ride shares, repairs and other transportation-related expenses can have a significant impact on your budget. Consider taking public transit, selling a second vehicle, investigating car share programs or setting up regular carpooling with a neighbour.
• Use online comparison tools to find the most cost-efficient grocery stores in your area.

If you are able to reduce your variable spending, make sure to conscientiously redirect the money. Try transferring the unspent funds immediately into a separate account. Or just make a note of what you didn’t spend, and decide what to do with the money at the end of the month. If possible, use this newfound space in your budget to pay down high-interest debt (thus reducing your fixed expenses in form of interest payments) or contribute to an investment account.

Maintaining your budget

Life isn’t static: not only will your income and expenses change, your priorities will change too. It’s wise to reevaluate your budget on a regular basis, and pay attention to the ways in which the small changes you’re making now can add up to accelerated change in the future.

We hope this article has inspired you to either create a budget or revisit your budget. We encourage you to save the budget sheet you completed and revisit it monthly. Budgeting shouldn’t be stressful. In fact, keeping an active budget will result in a better understanding of your financial position, and the ability to engage in proactive financial planning. Don’t hesitate to lean on your financial advisor for budgeting guidance and advice as you move toward achieving your financial goals.

Ultimately, being a good budgeter means being a good financial planner. Organizing your finances now will give you the opportunity to allocate more of your money towards saving goals such as an emergency fund, a house down payment or even retirement.