This ain’t your parents budget. This ain’t that article from some other FI telling you to reign in your Skip the Dishes orders. No, this is written for you, millennials. Skip the Google search because we’ve condensed some of (in our humble opinion) the best budget advice for 2022. Because who needs another blasé article based on baby boomer habits?

And don’t worry, this will only take a couple hours to complete. ​

Here’s how we’re going to break it down:

Step 1: Get eyes on what you’re actually spending
Step 2: Calculate your necessities
Step 3: Pay down debt
Step 4: Budget for the fun stuff
Step 5: Save what’s left

And if you’re still left with questions? We have other resources to help you. You can book an appointment with us to have this conversation in a non-judgmental place or you can use one of the tools below. We believe every Albertan deserves a conversation, so if doing a budget yourself is overwhelming, give us a call. 

Step 1. Get eyes on what you’re spending.
Open up your bank accounts and your credit card statements and look at your last 3 months. Sure, it’s scary and intimidating and maybe you’ll put it off for a few weeks, but it really all starts here. The aim is to understand how much you’re spending, and in what categories those expenditures fall into. 

The categories in question:

• Rent/mortgage (include property tax, home or rental insurance, etc.)
• Utilities (internet, water, heat, electricity)
• Food (break this down into grocery and take-out/restaurants)
• Transportation costs (car insurance, gas, etc,)
• Phone bill
• Medical costs not covered by insurance
• Pet costs (insurance, vet bills, food, etc,)
• Debt payments
• Savings
• Entertainment
• Subscriptions (Spotify, Netflix, etc.)
• Home and car maintenance/repairs
• Anything else

Try not to shame yourself or create solutions right away. The fact that you’re sitting down to do this is an incredibly positive and empowered thing! The goal here is just to simply see where your money is going — that’s all for this step.

Don’t let your parents’ disapproving tone ring out in your head. The millennial generation has different challenges, different priorities, and different ways of spending and saving — it’s ok for this to look different than what your elders would do.

Step 2. Calculate your necessities.
So what are these necessities? Pretty much anything besides entertainment and miscellaneous costs. It’s anything that must be paid each and every month or your life (or your dependents’ life) would not carry on. You must pay the rent. You must feed your dog.

For costs that vary month to month, such as food, start with what the bare minimum would be for groceries and “x” amount of take-out meals per week. We can add to this later if we need. What you should have now is something pretty close to what your previous 3 months of expenses looked like.

From here, see how much you have left over so we know what to do with the rest of your budget.

For example, let’s say that your income is $3000 per month (this is assuming you are single and live alone. If you live with a partner, do this step together with your combined expenses). Your total necessities including rent, car insurance, average gas spent per week, pet insurance, groceries, pet food, your counselling sessions, home insurance, car payment, internet bill, cell phone bill, and electricity bill come out to be $2400. So now we know that you have $600 to work with for things like debt repayment, take-out costs, entertainment, gifts, and saving.

We can hear a lot of parents yelling at us “Savings should be in there! It’s a necessity!” but here’s why we didn’t include it: it’s important to first evaluate your debts owing and how much you’re actually able to save. If you’re pressuring yourself to save $300 per month but then can’t afford groceries so your groceries are sitting on a credit card, that doesn’t make a whole lot of sense. So let’s start with the debt part of balancing that scale.

Step 3. Pay down debt.
Calculate all of your credit facilities and what you must pay to them each month. For example, you pay $250 per month to your car loan, minimum $55 to your credit card, and $150 to your student loan.

Our goal here is to pick the debt that costs you the most and pay that off first, meanwhile satisfying minimum monthly payments to the other debts.

What is the interest rate that you pay to each of these debts? It is likely going to be your credit card as most credit cards average a 19% interest rate. If you have $10,000 on your credit card you are paying upwards of $158 in interest every month. Student loans, lines of credit, and car loans tend to have lower interest rates, so even if you have $25,000 in student loan debt, your interest rate may only be 3-5%, making your monthly interest payments significantly lower. Basically, calculate what your minimum monthly interest payments are for these debts and pick the one that costs you the most each month.

You can also transfer debts like high interest credit cards over to your line of credit, which carries a lower interest rate. Then you save a bit of money on interest. Pay that credit facility down and then go to the next most expensive debt and pay that down, etc.

A side note: it’s ok if this takes a while. Paying down debt doesn’t happen overnight and can often take years, especially for things like student loans.

It’s also worth noting that saving should also be a goal while paying down debt. The general suggestion is to have 3 months' worth of expenses saved away. Try to aim for that as much as you can while juggling your debts. We’ll talk about this later.

Having debt is normal, but if you feel like it’s unmanageable, it might be worth considering a consolidation loan. This type of loan will take your outstanding debts and put them into one . Talk to your financial advisor if this is a genuine concern for you.

Step 4. Budget for the fun stuff.
A new t-shirt, a manicure, drinks with your pals every Friday — whatever your “fun” thing is — it belongs in the budget. It’s unrealistic to expect millennials (really, people from any generation) to forego the things that make them happy just to pinch pennies for a house they can’t afford. It’s not sustainable.

First, refer to step one and look at what you spent. This should give you an idea of what is reasonable. If you’re spending more than you make, then you can prioritize where you want to spend your money. This could be limiting your new clothes budget, saving up over time for the new gadget you want, or eliminating subscriptions you don’t really use (Apple Music, Netflix, Audible etc). You could even try to widdle down bills like your cell phone bill; companies will buy you out of your plan in exchange for a cheaper deal in a heartbeat. It’s easier than you think!

You might also want to look at what you spend on groceries vs. what you spend on food you eat out. We are not about to tell you to stop eating out and make your lunch at home — stick with us! If you find that you eat take out for dinner because you work late, you hate cooking, or because you socialize, and the groceries you buy go to waste, then to us, the answer is simple: budget for take-out/restaurants and put less on your grocery list. If you’re buying spinach each week that you throw away and your carrots are all wiggly and shriveled, then don’t buy them. Get that salad from your favorite local place instead. Anybody can tell you that eating out is more expensive, but if it works better for your lifestyle, then prioritize it and adjust your grocery budget.

You can also do things like tighten your budgets for things like haircuts, manicures, clothes, books, etc. If you’re buying clothes and those expenses are sitting unpaid on a credit card, then implement some rules that say you only buy clothes seasonally and give yourself a trimmed budget. Or, try going an extra week or two between haircuts or manicures, etc. Whatever means the least to you, tighten that budget first.
If you are within your monthly income then don’t change anything unless you want to save more. You’re allowed to have fun and you should have fun. It’s part of being human. You don’t have to sacrifice this fun just so you can “feel like an adult.” It is possible to be responsible and enjoy your life.

If you enjoy that kind of sacrifice, then we’re not here to stop you. We just want to offer an alternative to unreasonable expectations that millennials change their lifestyle because they feel like they “should.”

So now that fun part…

Step 5. Save what’s left.
We’ve done the bulk of the budget by now. You’ve sorted your bare minimum expenditures, you’ve figured out your debt payment, and you know what your budget is for your lifestyle. Now, it’s time to save.

Being a part of a credit union, it is our obligation to tell you how important it is to save for your future and your retirement, and that you should have 3-6 months of income in savings (blah blah blah). But we recognize that many millennials are stressed and overwhelmed by these goals and some of you may simply not have an income that supports it.

So, let’s talk about that first. Let’s say you’re not in a great financial position to save money right now. You have debts you’re paying, your rent is high, you live alone and your job doesn’t pay a whole heck of a lot. We totally understand. If you have a line of credit or credit card, it might be wise to put your money towards that than a savings account. A line of credit or credit card will likely cost you more money in interest than any interest you will earn in a savings account, GIC, or even mutual fund. Tuck away $50-100 per month, and then whatever is left over at the end of the month. Make sure that if you are contributing some of this money to an RRSP or TFSA that you’re also tucking some away in an accessible savings account in case of emergency.

If you run into an emergency without a significant amount of funds in your account, you will have at least freed up some room on your line of credit or credit card. Of course, your ultimate goal is to get out of this cycle, so strike that balance between emergency fund and debt payments as best as you can.

Once you pay down debt or advance to a job that pays more, than you can start contributing more to your savings, including a fixed regular contribution to your RRSP. Our recommendation is to get your RRSP funds invested into something like a mutual fund that will grow at a faster rate.

If you’re in a decent financial position right now where you’re not spending all of your money each month, do your best to throw as much as you can into savings. A regular savings account, a retirement account (RRSP), a TFSA. Try to contribute a bit to each. Some people will compile a generous amount of savings and do a big contribution to their RRSP. That’s totally fine, whatever works for you — just don’t forget about it. Your RRSP misses you.

What's Next?
Need help budgeting? Want to open an extra savings account? Considering a consolidation loan? We’re here to help.

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