Budgeting

Budgeting Script, Activity and FAQ

Slides for the script can be accessed here

Slide 1: Introduce yourself and the topic (budgeting)

Slide 2: There are a number of topics that will be discussed today. It includes:

  • Financial Management
  • Quality of Life
  • How to Create a Budget
  • Government Grants
    • OSAP
    • RESP
    • RRSP
    • Grant website

Slide 3: Financial management

  • Whether it is personal finance or business finance, proper understanding, planning and controlling of financial activities such as how to allocate and utilize funds, can help individuals make better decisions on financing resources.
  • Comprehensive evaluation of an investor's current and future financial state by using currently known variables to predict future cash flows → this means that the main purpose of financial management is to make sure you are in a stable financial state.
  • There are many benefits to good financial management:
    • Save and plan for retirement
    • Fund your children’s education
    • Buy a home and pay off mortgage quickly
    • Minimize taxes

Slide 4: Quality of life

  • By definition, it is the standard of health, comfort, and happiness experienced by an individual or group.
  • Knowing what qualifies as good “quality of life” for yourself means you have a good understand of your own needs and wants --> a very important concept in budgeting
  • Different people experience varying levels on the quality of life spectrum; some receive low income and can only afford basic life necessities, while others earn high income and can afford luxury goods. They fall into different categories on the federal income tax brackets, with the high tiers (with lower income) paying less tax and the lower tiers paying more.  

Slide 5: How to create a budget:

Now, we will talk about some key points on how you can create a good budget.

Slide 6: Wants vs. needs:

  • Needs: something you cannot live without: Things like food, clothing and shelter are needs because you need those things to survive in life.
  • Wants: something you would like to have, but can live without. Things like fancy cars or jewelry or phones are wants because these are things you simply would like to own, but not things that you need to survive.  

Slide 7: Step 1 in creating a budget: understanding your costs

  • What is your goal? --> what is it that you want to achieve?
  • Figure out the costs of your goal --> is it recurring or a one-time thing?
    • There would likely be many different costs incurred, and you must carefully think through all the details to make sure you have checked off everything that could potentially cost you something.
  • List out all your expenses/costs --> keeping everything organized is crucial.

Slide 8: Step 2 in creating a budget: sources of income

  • This is the other side of the equation: where are you getting money from? Costs/expenses take money away from you, but sources of income puts money back into your account.
  • Where is your income coming from? Will it drastically differ in the future?
  • The best way to go about this in an organized manner is to create a timeline that showcases these income amounts and variances in them depending on different future events and situations.

Slide 9: Step 3: tying your lists together

  • All together now!
  • This is an important step because it connects the two things you just calculated together. Without this step, you would just have lots of scattered numbers and values, with no concrete way to organize them.
  • All you have to do is add up the total amounts from both your list and then compare the two.
  • Remember, expenses is the amount that you have lost; savings/income is the amount that you have gained.
  • Thus, if your expenses is greater than your income, that means you are losing more money --> should consider other sources of income such as grants and loans.
  • If your income is more than your expenses --> consider savings options in order to build a healthy financial habit and plan and in case of any emergencies in the future.

Slide 10: Now let’s talk a little bit about government grants...

Slide 11: Government Grants

Government grants are essentially financial awards given by the government to individuals. They are meant to help fund projects and activities that will directly or indirectly improve the economy.
Here are some websites to give you more information about the different types of government grants there are and how you can apply for them.

Slide 12: OSAP - Ontario Student Assistance Program

  • OSAP is a financial aid program that gives individuals (who normally cannot afford school) the opportunity to go to university and get an education.  
  • It offers two kinds of funding:  
    • Grants - money you don’t have to pay back
    • Loan - money you need to repay once you are finished with school (you can repay gradually throughout the years); There are other programs that can aid you in repaying your loans once you are out of school.
  • This program is open to Ontario residents of any age who are:
    • Canadian citizens
    • Permanent residents
    • Protected persons
  • Amount received depends on your education expenses (such as tuition, books, living expenses, etc.) and personal financial situation (such as family income).
    • There are other factors that are considered which may allow you to receive more money, such as being Indigenous or having a disability.
    • New OSAP rule make average tuition free for students whose family income is less than $50 000 per year

Slide 13: RESP - Registered Education Savings Plan

  • Savings accounts that parents or grandparents open in order to start saving for their  children’s education
  • It is essentially an agreement between an individual needing the money (called the subscriber) and a person giving the money (called the promoter).
    • The beneficiary, the student pursuing post-secondary education, takes the payment from their RESP
    • There are a number of different options available for RESPs, including stocks, bonds, mutual funds, and GICs (guaranteed investment certificate).
    • Can be opened at banks or organizations (these people, called promoters, pay educational assistance payments to the beneficiaries).
    • Includes saving incentives:
      • Canada education savings grant (CESG): basic 20% of annual contributions for a qualifying beneficiary.
      • Additional CESG may be available depending on family income.
      • Canada learning bond (CLB): additional incentives for children born on or after January 1, 2004
  • Plan options vary depending on the organization and your needs

General break-down of RESP:

  1. Subscriber opens an RESP account --> enters contract with promoter
  2. Subscriber will make contributions to the RESP. Government grants such as CESG, or CLB, will be paid to the RESP.
  3. Promoter will make payments to the beneficiary so they can attend post-secondary

Slide 14: RRSP: Registered Retirement Savings Plan

  • Any income earned in the RRSP is usually exempt from tax as long as funds remain in the plan
    • Contributions to the plan are deductible from income, thus resulting in a reduction in income tax for the individual for that year.
    • Wh en it is withdrawn from the account, however, it becomes taxed as income.
  • Set up through a financial institution (ex. bank, credit union, trust, insurance company)
  • For holding savings and investment assets
    • Asset options: savings account, GICs, bonds, mortgage loans, and mutual funds, etc.  

 

FAQ - Budgeting only

Why is budgeting important?

A: Budgeting allows you to keep track of how you are using your money, thus it allows you to see in what way should you be allocating your money appropriately. This helps you make sure you have enough money to spend on the things you need. It will also prevent you from going into debt or help you slowly move out of it if you are already in debt (by paying off a bit every month and putting aside some money for savings).

How do I use my budget plan to benefit myself financially for the future?

A: It helps to plan out your budget for a few months in the future. This way, you can roughly  predict how each month will look in terms of your finances. If there is extremely contrasting fluctuations between the months, you can try to look for ways to balance it out a little bit. You can also see how much money you can save for big spending products like houses or cars. Lastly, forecasting for the future can allow you to plan for any long-term life goals you might have, such as travelling, or starting your own business.

What items should I include in my budget?

A: Proper budgeting means you should include everything that you spend money on, no matter how small or big. It helps to list your costs in order of priority to you. Here are some example categories to get you started thinking about it:

  • Housing
  • Debt
  • Furniture
  • Vehicle
  • Education
  • Entertainment
  • Food
  • Personal car e

Does it cost anything to create a budget?

A: There are tons of software programs online that can help you with creating a budget, and some of them may come with a cost while others are completely free. The most important thing to remember about budgeting is that, simply put, it is a list of all your revenues (money earned) and expenses (money lost - costs) over a period of time. For beginners, simply determine how much you have, how much you owe (if you have any debt), how much you make, and how much you usually spend every month (expenses), Then, use an easy online program such as Microsoft Excel and online tools like Mint, and input your numbers.