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Developing and following a personal budget: An effort that pays off!

Posted on Monday October 19, 2020


Developing and following a personal budget: An effort that pays off!

Are you one of those people who are afraid of the word “budget”? Whether you want to save money or pay off debt, budgeting is the everyday superhero! An interview with Derrick Blanchard, Richibucto's Wealth Management Advisor and Mutual Funds Advisor at Credential Asset Management Inc., who explains the importance of a well-balanced budget in managing personal finances.

A budget is your ally

It's not often that you hear someone raving about the idea of developing a budget. Indeed, the word “budget” is often seen as taboo.  “Some people find planning as interesting as watching paint dry,” jokes Derrick Blanchard.  “That's why we often don't get into budgeting until it's too late and we're in financial trouble. Yet, when we rethink our approach, a budget can really help us achieve short-, medium- or long-term goals. By changing our negative perception and focusing on our goals, we turn the process into something positive. Used at the right time, a budget can be a great ally!”

An ounce of prevention is worth a pound of cure: The stabilizing and empowering role of a budget

To be in a good financial position during the most important stages of life, such as retirement, it's crucial to have taken the right steps beforehand. According to Mr. Blanchard, people often mistakenly think they don't know what they're doing.  “Most people make investments, put their budget on paper, and so on, and without realizing it, they are constantly reviewing their budget in their own way. As an Advisor, my role is to make them aware of their existing financial practices in order to optimize them so that they can serve as a springboard for achieving tangible life goals.”


Derrick Blanchard
Business Development Support Advisor

Making a budget: Everyone's business

 “Whether a household’s income is $40,000 or $500,000, a budget is always a good way to keep track of your spending and to reach your goals, whatever they may be! Everyone should do it.”  Mr. Blanchard also believes that it's always best to build a personal plan rather than comparing yourself to others. “A plan that works you.” 

Staying within budget: How to reach your goals

According to Mr. Blanchard, there's no secret.  “The best way to stay on track is to start with a realistic budget.”    “Then, the key to success is to keep reviewing it.” A Wealth Management Advisor offers advice adapted to the needs of each individual in accordance with their financial realities, which change throughout their different life stages. For example, the proposed strategies will not be the same for a person in their twenties as for someone in their sixties.

Beware of underestimated purchases!

What is a well-balanced budget? According to Mr. Blanchard, the perfect budget is one that takes into account all expenses, including the savings portion. He believes that we need to be honest with ourselves and do a thorough job of listing our expenses. “Spontaneous daily expenses, such as having a coffee, impulse choices at the grocery store, and transactions that are out of the ordinary count as much as  planned monthly expenses,” he explains.  “We have to keep track of the money coming out of our pockets, despite the added challenge of virtual payments. It's more difficult to keep track now than it was before.”  On the other hand, these hidden expenses are also the ones that can be reduced most easily, as most of them are unnecessary or at least can be reconsidered.

Keeping in shape without getting out of breath: When an Advisor becomes a coach

Just as a nutritionist helps clients follow their diet and remain consistent, your Advisor is there to supervise and motivate you to be persistent.  “We're the equivalent of a coach in a gym!”  says Mr. Blanchard.  “As professionals we’re there to help people save by checking their budget, explaining what's possible and what’s not, encouraging them to stick to it and providing ongoing support.”

The role of savings in a well-balanced budget

It’s generally recommended you save 10% of your salary, but there can be a world of difference between what’s ideal and reality.  “Of course, this percentage has to be adjusted depending on the individual and their income. Someone could decide to put only 5% aside‒the important things is to be consistent,” says Mr. Blanchard. For example, someone who’s paying off student debt would be better off saving, even modestly, because it’s more profitable in the long run. On the other hand, someone who gets a pay raise should increase the percentage of their income spent on savings.” In short, savings should not be viewed as an expense, but as an investment.

Tools to streamline the process and encourage consistency

It's always easier to drive nails with the right hammer. Whether you’re building a house or creating a budget, there are practical ways to make sure you have the best possible chance of success. With UNI’s budget calculator, you can compare income and expenses and keep track of various costs such as those related to transportation, entertainment, health care, credit repayments and savings.

There are many ways of keeping track, such as using Excel spreadsheets or even paper-based accounting.  “There's no right or wrong way to do it, just find the best one for you. It depends on your generation and on what’s easiest for you,” says Mr. Blanchard.

Can you rebalance your budget?

It’s basically a question of mathematics! Two options are available to people who wish to rebalance their budget: increase income and/or limit expenses. Mr. Blanchard explains that sometimes choices or sacrifices have to be made, keeping in mind that these efforts are not necessarily negative. It's a matter of focusing on larger life goals, such as buying a new car, house, boat, etc.   “You could limit the number of coffees you get from the local cafe and think about a new cottage. The coffee tastes much better at the cottage anyway!”

Like the Little Prince who knew how to tame the fox, you too will learn to love your budget. As you slowly get used to it, you will become inseparable! And, together, you’ll be able to reach for the stars and achieve your dreams.

Mutual funds are offered through Credential Asset Management Inc. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds.

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