Implementing a Personal Budget

Budgeting

What is it?

Using 3 bank accounts for different purposes:

Account 1 (“Operating Account”):
For crediting salary and variable expenses, with a debit (or credit) card
Account 2 (“Pay Myself First Account/s”):
For savings or investments
Account 3 (“Fixed Expense Account”):
For fixed expenses, e.g., income taxes, mortgage payments

Helps us implement our budget – keep variable spending under control while saving/investing – without tedious, detailed expense tracking every month.

At least once a year, do up a budget, identifying fixed expenses and variable expenses.
Click here to download our budgeting worksheet.
Set up the three accounts.
Every month, day after payday, transfer a fixed amount into the Pay Myself First Account by GIRO/Standing Instruction. Set up a deduction for a “Regular Savings Plan” (RSP) into an investment account, if you’ve crossed the Emergency Fund threshold.
Another fixed amount is transferred into the Fixed Expenses Account. From here, GIRO or pay out fixed expenses.
The first Operating Account has the remaining money for variable expenses. Pay all variable expenses out of this, using a debit card (preferably) or a credit card (please pay off in full every month).

Fixed expenses are annual, e.g. insurance premiums.
Split up the annual amount into monthly amounts to be transferred into the Fixed Expense Account.
It’s a one-time set up effort,but be careful not to let things slip in transition.
Choose bank accounts that have no fall-below fees. (Fees charged if your average account balance that month is not above a certain amount.)