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Using a budget to achieve goals

Budgeting with your goals in mind

Now that you have selected your personal financial goals, it is important to make sure your financial goals fit within your budget.

Transcription — SMART Financial Goal Example 2

[Steve is sitting at the desk in his home office and he is writing in a notebook.]

Narrator: This is Steve.

[The screen zooms in on Steve.]

[The screen changes to a close-up of Steve’s notebook. The screen shows a piece of paper titled ‘Monthly budget’. The following words are written in a list format below the title: ‘Housing’, ‘Food’, ‘Payments to LIT/estate’, ‘Transportation’, ‘Entertainment’, ‘Emergency savings’.]

Narrator: Steve has now selected his personal financial goals and is reviewing his budget to ensure his SMART financial goal is a good fit.

[The screen zooms out to show the top of Steve’s desk. Next to Steve’s notebook there is a piece of paper titled ‘Financial Goal’. Underneath the titled it says ‘$75/month for 5 years = $4,500 in emergency savings fund’.]

Narrator: Recall Steve’s SMART financial goal that he created earlier.

[Steve writes the word ‘SMART’ at the top of the piece of paper.]

[The scene changes to a screen with ‘$75/month’ written next to an image of a first-aid kit with money sticking out of the top with the words ‘Emergency savings fund’ above. The amount ‘$4,500’ is written below next to an image of a calendar and the term ‘5 years’.]

Narrator: His goal was to “Save $75 each month over the next five years for a total of $4,500 in a savings account for the purpose of an emergency fund”.

[The scene changes to an image of Steve looking at a tall snow-cap mountain. At the top of the mountain there is a red flag with the amount‘$4,500’ written above the term ‘5 years’. A light bulb appears next to Steve.]

Narrator: Steve decides to break this goal down into several shorter term goals.

[The screen zooms in on the mountain and shifts up the mountain to reveal multiple red flags dispersed from the bottom to the top of the snow-cap mountain.]

[An illustration of an arrow moving upward and downward appears in-between Steve and the mountain.]

Narrator: Steve is making it easier to measure his progress by breaking down his longer term financial goal into several shorter term goals.

[The scene changes back to Steve sitting at the desk in his home office and typing in his laptop. Steve is thinking about his monthly budget.]

Narrator: Steve is now counting the $75 per month as a regular, ongoing amount in his budget.

[The screen zooms in on Steve.]

[The scene changes to an image of Steve’s Budgeting Template. The screen zooms in on the savings section of his Budgeting Template and the ‘Emergency fund’ section is circled in red.]

Narrator: Steve enters this amount in the emergency fund section of his budget.

[The screen changes to two images of calculators on the screen. The number ‘+120’ appears on the screen of the first calculator and the words ‘Budget surplus’ appear above the first calculator. The number ‘-175’ appears on the screen of the second calculator and the words ‘Budget deficit’ appear below the second calculator.]

Narrator: It is important for Steve to determine if this amount will cause him to have a budget surplus or a budget deficit at the end of the month.

[The first calculator image and the words ‘Budget surplus’ shift downward off the screen. The second calculator image and the words ‘Budget deficit’ shift to the far left side of the screen. On the right side of the screen there is a blank light grey section. An image of a paycheque appears in a green bubble on the light grey section of the screen, then an image of a clothing rack and a bag of groceries appear in another green bubble on the light grey section of the screen, and then a written copy of Steve’s SMART Financial Goal appears in a third green bubble on the light grey section.]

Narrator: If this change to his budget results in a deficit, then Steve will have to either:

  • Find a way to increase his income;
  • find ways to decrease his other expenses; or,
  • adjust his financial goal to better align with his budget. For example, maybe instead of saving $75 each month, he can save $50 each month instead.

[A red ‘X’ appears over the ‘$75’ written in Steve’s SMART Financial Goal and ‘$50’ is written instead. A red ‘X’ also appears over ‘$4,500’ and ‘$3,000’ is written instead.]

[The scene changes to Steve sitting in an office setting with his BIA Insolvency Counsellor.]

Narrator: Make sure that your SMART financial goals fit into your budget. Discuss how to fit your SMART financial goals into your budget at your in-person counselling session with your BIA Insolvency Counsellor.

Think back to the example about saving for an emergency fund. Steve’s longer-term goal was to save $4,500 in five years for his emergency savings. This goal was then broken down into several shorter-term goals: instead of saving $4,500 over the next five years, think of it as saving $75 per month or $900 per year.

The $75 per month should now be counted as a regular, ongoing amount in Steve’s budget.

Budgeting template: Steve's budget

An image of the budgeting template
Description

The diagram is a screenshot of the “Savings” table within the Budgeting Template.

The two columns titled “Amount” and “Frequency of Deposits” are meant to be completed by the user. The cells in the “Amount” column do not contain any text and are shaded in light blue. The user is meant to put a dollar amount within the “Amount” column next to any savings which applies to the user. The bottom cell within the “Amount” column is blank. In the “Frequency of Deposits” column, within the cells that say “Every Month” and “Please Select” there is a small grey drop-down button on the right side of the cells. These cells are meant to be selected by the user depending on how often the user deposits the amount to their savings. The bottom cell within the “Frequency of Deposits” column is blank. The cells within the “Monthly Equivalent” column are automatically calculated for the user based on the information that was entered within the “Amount” and “Frequency of Deposits” columns. The bottom cell within the “Monthly Equivalent” column is equal to the user’s total monthly amount of savings.

Savings Amount Frequency of deposits Monthly equivalent
Emergency fund $75 Every month $75
Financial goals blank Please select $0
Total savings blank blank $75

When Steve adds that amount to his budget, he must determine whether he has a budget surplus or a deficit.

A budget surplus is when your total income is more than your total savings and expenses.

A budget deficit is when your total income is less than your total savings and expenses.

If this change to his budget results in a deficit, then he will have to:

  • find ways to increase his income;
  • find ways to decrease his other expenses; or,
  • adjust his financial goal.

image of debtor with counsellor

If you have questions, write them down and bring them to your in-person counselling session.

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