SPEND (AND SAVE) ON THE IMPORTANT STUFF FIRST

It’s difficult to get a handle on your finances if you’re always spending reactively. It can help to change your mindset to one of funding your life with your paycheques rather than using your paycheques to pay for things you’ve already purchased. Newell recommends software like You Need a Budget, which teaches you to only spend the money that you have – not the money that you’ll eventually have.

“When you get paid, you’re allocating that money towards the different categories of your life,” Newell says. “Out of every paycheque, you’re setting aside $50 toward savings, $100 toward groceries. You’re proactively thinking about how that money funds your values, goals and lifestyle.”

This also requires setting aside money for things that happen every so often – like oil changes for your car, your Costco membership renewal, or wedding and birthday gifts. “I refer to those as unpredictable expenses, more so than unexpected expenses,” says Sean Michael Pearson, a financial advisor with Ameriprise Financial Services. “Every appliance in your house is going to break, but it’s unpredictable when it will happen. When you’re doing values-based budgeting, the easiest way to get knocked off track is one of those unpredictable expenses.”

To build unpredictable expenses into your budget, look at what you spent on that category over the previous 12 months. Or, for expenses that you anticipate at some point in the future, like replacing your home’s roof, do some research to get an estimate of the cost. Take either total and divide it by the number of paycheques you’ll receive, then set that money aside each paycheque. That way, you’ll be covered the next time that expense rolls around.

“I was able to see that I can put money away incrementally for the things I value, and then be comfortable doing the things I want to do outside of that,” Laguna says. For instance, Laguna now puts $300 a month away to help her cover varying healthcare costs. “None of those costs are on a regimented schedule,” she says. “I didn’t [use to] know where that money was going to come from.” Now, she says, when her healthcare expenses arise, “the $300 has been adequate in covering all of my medical needs.”

One thing to keep in mind is that overhauling your budget won’t be immediate, so be patient. “To truly change a budget, you might need a little time,” Pearson says. “I can spend less on a car, but maybe not until this car payment is done. It might take time to really make noticeable differences.”

Once you commit to values-based budgeting, it can make money management feel more like a way to control your life – versus your money controlling you. This technique allows you to “Marie Kondo” your purchases: If it doesn’t bring you joy, spend less money on it. “You prioritise the things that matter most and become more in tune with your spending habits,” Laguna says. “It’s a mindset shift.”