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We broke life’s expenses down into Monthly, Annual, Lumpy and Catastrophic expenses. In Part 2, we're going to deal with monthly expenses. Monthly expenses should be the most predictable of the expense categories. They happen every month. Some are fixed and some are variable. With your household income, you should be able to comfortably cover these expenses including covering seasonal variations. If you have nothing left over at the end of the month after paying monthly expenses, then you have no money to deal with the annual and lumpy expenses. This is not a good situation. Required monthly expenses are food, a place to live and transportation for work so you can earn income. This is basic living. Each of these expenses have a broad range of cost depending on how you manage them. For food expense, if you plan and cook your own meals, shop for bargains, use leftovers for lunch and stay away from pre-packaged and prepared foods, you will likely have the lowest cost for food. If you eat out a lot (including buying coffee and lunches), buy pre-packaged and prepared foods and give your kids lunch money instead of lunches, you will be at the higher end of the monthly food cost range. If your food management falls in the latter description, this is one of the easier areas to quickly reduce the monthly cost. You need to change things up but, you can do this quickly and have an immediate positive impact on your expenses. Living and transportation expenses can be more challenging to manage. The key here is to not get into too large of a commitment in the first place. Once the commitment has been made, it can be difficult and take a long time to manage the cost to a lower level. In the interim, your finances may be stretched. For example, buying a high priced vehicle when a lower priced one would do. As the axiom goes, the car is worth 20% less as soon as you drive it off the lot. So, if it is a fully financed or leased vehicle, it will be very difficult if not impossible to get out of the obligation once committed to. Buying a vehicle is a significant decision that should not be made quickly and must be well thought out. Be disciplined, take the emotion and impulse out of the decision and focus on the practicality; what do you really need for a vehicle and then what are the cost options for such a vehicle. The same goes for living accommodations. Having cash left over after paying your monthly expenses is very important to effective financial management of your life and, it will give you great peace of mind. Maybe you won’t have what the Jones’ have but you will sleep better at night. https://maritimetrustee.ca/blog/budgeting-101-part-2-of-5

On February 28, 2018, the Office of the Superintendent of Bankruptcy released its most current statistics on personal bankruptcy and consumer proposal filings for Canadian debtors. Canada - there were 57,969 personal bankruptcies and 64,229 consumer proposals filed in the 12-months ended December 31, 2017. Personal bankruptcies were down 8.5% and consumer proposal filings were up 2.8% as compared to the 12-months ended December 31, 2016. There were 4,142 personal bankruptcies and 4,449 consumer proposal filed in Canada in the month of December 2017. New Brunswick - there were 2,457 personal bankruptcies and 1,904 consumer proposals filed in the 12-months ended December 31, 2017. Personal bankruptcies were down 15.4% and consumer proposal filings were up 23.8% as compared to the 12-months ended December 31, 2016. There were 189 personal bankruptcies and 162 consumer proposal filed in New Brunswick in the month of December 2017. Nova Scotia - there were 3,807 personal bankruptcies and 1,917 consumer proposals filed in the 12-months ended December 31, 2017. Personal bankruptcies were down 9.2% and consumer proposal filings were up 9.1% as compared to the 12-months ended December 31, 2016. There were 259 personal bankruptcies and 113 consumer proposal filed in Nova Scotia in the month of December 2017. Prince Edward Island - there were 387 personal bankruptcies and 286 consumer proposals filed in the 12-months ended December 31, 2017. Personal bankruptcies were down 22.6% and consumer proposal filings were down 5.3% as compared to the 12-months ended December 31, 2016. There were 21 personal bankruptcies and 21 consumer proposal filed in Canada in the month of December 2017. https://maritimetrustee.ca/blog/2018/3/14/december-2017-personal-bankruptcy

If you want to make a budget, you need to understand your expenses, short-term, medium-term and long-term. When I think about life’s expenses, I break them down into 4 categories. Monthly- these can be fixed or variable. Fixed expenses can include rent, mortgage, car loan, insurance, cable, telephone, internet. They are pretty much the same every month. Also included here, for the planners, might be regular RRSP and RESP contributions. Variable monthly expenses may include oil, electricity, cell phone, vehicle fuel, food. These types of expenses generally occur every month but may have some variability as to amount. Some are seasonal in nature such as heating. Annual - some are fixed and some variable. We know that we are going to incur these expenses and may know roughly when they are going to be incurred but not necessarily how much they will be. Think of the annual vehicle inspection and registration as fixed. The variable component would be the cost of repairs in order to get the inspection completed. Also included here would be Christmas and birthday expenses, and perhaps annual vacation expenses. Lumpy - these are expenses that we know (or should know) are coming down the track and will have to be incurred but only happen once in a lifetime or only once every couple, few, 5, 10 or 15 years (or so). Examples of these types of expenses include new tires for your car, helping your kids fund their post-secondary education, children’s weddings, significant dental or other medical procedures that are not covered by insurance, significant home expenses (roof, windows, siding, septic, well). Lumpy expenses might also include goal expenses such us a down-payment for a house or cottage, the dream vacation or buying a car for cash. Catastrophic- these are the really nasty ones. You don’t see them coming and the impact can be financially crippling. Examples include uninsured or underinsured damage to your house or vehicle, non-covered medical expenses / medication, litigation costs. I would also include here the implications of loss of income where employment or level of income cannot readily be replaced. The first 3 categories of expenses can be budgeted and planned for. The last category of catastrophic expenses cannot be planned for but, measures can be taken to lessen or mitigate the impact of these expenses. Understanding these categories of expenses is the first step in budgeting and I am going to talk about these categories and what you should consider in subsequent articles (4 more parts). In the meantime, try to break-down your expenses into these categories and start to think about the Monthly, Annual and Lumpy expenses in your world.