Graig Wong | The Canadian Press

OTTAWA – If you don’t have a budget, then financial planners want you to add another thing to your list of new year’s resolutions.

Credit counsellor Pamela George says budgeting is important no matter what your income.

“I think it is even more important for a bigger salary to have a budget because you need to account for it and you need to understand that $200,000 can finish as fast as $12,000,” said George, who works for the Credit Counselling Society in Ottawa.

Start with your paycheque. You need to know how much you are bringing in each month. Then list your mandatory expenses that you can’t really change, such as rent or mortgage payments, utilities, car payments, insurance and debts.

George also includes savings and putting money aside for an emergency fund if you don’t already have one in the mandatory category.

“I take savings and put it under mandatory because it is mandatory that you save,” she said.

Then comes your discretionary spending for whatever you might have left over. Things that you have some flexibility with when it comes to your plan. Entertainment, dining out, a gym membership.

“These are all things you have a little more control over,” George said. “You can choose not to buy clothes one month. You can choose not to go to the movies.”

Jane Rooney, financial literacy leader at the Financial Consumer Agency of Canada, says tracking spending for a couple of weeks to find out how you’re actually spending money is important when building a budget.

“The more formal strategy allows people to see clearly where the income is coming in and where the expenses are going,” she said.

“Often people underplay where they’re spending the money.”

The FCAC offers several tools online to help plan a budget, including a comprehensive calculator, and helps detail how you spend your money.

Household debt has flirted with record levels in relation to income, fuelled by low interest rates and a boom in the housing market.

The importance of having a budget is especially important for those who have debt, especially bad debt like credit cards.

“Knowing to pay as much as you can on a credit card bill as often as you can if you cannot pay the balance in full is a really important tip,” Rooney said.

Having a budget doesn’t mean never buying a latte and a pastry on your way to work or always brown bagging your lunch.

But it does mean understanding what those things cost and whether or not you can afford them.

“There is a sense of freedom and a peace that I have because I work with a budget,” George said.

“The consequences of not having a budget is debt.”

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