How a budget can help keep you from living paycheck to paycheck

Reni Eniola joins Kent Morrison to talk about how having a budget can help you break out of the cycle of living paycheque-to-paycheque.

As the cost of living continues to rise, many can find themselves living paycheque to paycheque. Reni Eniola, host of the Don’t Go Broke Trying podcast, has advice on budgeting and how to achieve your long-term financial goals.

This interview has been edited for length and clarity.

Kent Morrison: Let’s start with setting up a budget. Where do we begin?

Reni Eniola: I would say that step number one is to figure out what your numbers are. And when I tell people this, it feels very overwhelming, but honestly, it’s one of the most important steps if you want to know what’s going on in your finances, and the only way you can improve is to actually know what’s going on in your finances.

So the first thing I like to do is to focus on three key numbers. One, your monthly income after tax, so what comes into your bank account after tax. Two, the fixed expenses you have each month, which are things like rent and your transportation and food, things that always happen every single month. Then number three is the expenses that change month over month, which are called your variable expenses, think of things like entertainment or costs that change on a regular basis.

So the way that you find out this is by looking at your bank statements, and I tell people, let’s look through the last three months. Again, I know it feels overwhelming, but it’s very, very, very important.

KM: So you take that first step, you kind of get your base level. What do you do next?

RE: First understand where you stand, does your income equal your expenses? If your income currently equals what your expenses are every single month. That means you’re just breaking even. If your income is greater than your expenses, this is the position that all of us want to be in, that means that you have money that you can use for your other goals. If your income is actually less than your expenses, this is not the ideal place, but it is where some of us are, so you should focus on increasing your income so that you can achieve your goals.

It’s important to know where you stand, and then we can now set goals from there. So if you are in that place where we all want to be, where your income is greater than your expense, every month, you can set some goals. A goal could be traveling, it could be building an emergency fund, buying a car, buying a home, getting debt free. These are all examples of goals, and having this disposable income is what allows you to achieve those goals and I think it’s important that you get very specific with your goals and have a timeline to them so that you can achieve them even easier.

KM: So it’s great to get that base set, that’s a hard part to do, you set your goals, but then things come up, something breaks you need to fix or there’s an unexpected cost and that can knock you off track. Do you have any tips to stay on track with those goals?

RE: Yes, that is where saving comes in and your emergency fund comes in. I am a big, big, big proponent of every single person having an emergency fund, and you should just see this as a fixed expense. It is a bill that you pay yourself. Even if you start small, let’s say you can only afford to put away $50 a month, it is something. So you take your $50 a month and you put it into a separate savings account just for emergencies and whenever something pops up, you will tap into that account.

KM: There you go, smart stuff. And this has to be sort of an active thing, you have to be actively thinking about where this money goes.

RE: Yes, it’s very important to be active about it. The way I like to be active regarding my savings is that I like to track, track, track, on a spreadsheet or on an app, or some people like to do it by pen and paper, whatever works for you, you can track and plan towards the goals that you have.

So you have your savings goals, you have your investment goals, maybe you have debt repayment goals. All of it should be tracked on some kind of budgeting template and you should also check in on it on a regular basis to make sure that your spending is actually matching the goals that you have set so you can achieve them.