← Guides / Canada

Canada Budgeting Guide

the budgeting in Canada. The FCAC Budget Planner is the "official federal budget tool" (the "itools-ioutils.fcac-acfc.gc.ca/BP-PB/budget-planner" — the "create the budget and receive the personalized tips"). The 50/30/20 rule is the "popular budgeting method": 50% of the after-tax income for the needs (the "housing, the food, the transportation, the utilities"), 30% for the wants (the "entertainment, the dining out, the hobbies, the travel"), and 20% for the savings and the debt repayment (the "RRSP, the TFSA, the emergency fund, the debt payment"). The zero-based budget assigns every dollar to the "category" (the "income minus the expenses = zero"). The emergency fund is the "3 to 6 months of the essential expenses" (the "rainy day fund" — the "job loss buffer"). The pay yourself first strategy automates the "savings before the spending" (the "automatic transfer to the TFSA or the savings account on the payday").

Making a Budget

• Track your income: The "after-tax income" (the "net pay" — the "take-home pay"). Include the "salary, the self-employment income, the rental income, the investment income, the government benefits (the CCB, the GST credit, the OAS)".
• Track your expenses: The "fixed expenses" (the "rent or the mortgage, the property tax, the insurance, the car payment, the loan payment" — the "same every month"). The "variable expenses" (the "groceries, the utilities, the transportation, the entertainment, the clothing" — the "changes every month"). The "periodic expenses" (the "annual insurance, the property tax, the vacation" — the "once or twice per year").
• FCAC Budget Planner: The "online tool from the Financial Consumer Agency of Canada" — the "step-by-step budget creation" — the "automatic categorization" — the "personalized tips to improve the finances". The tool is free and the "no registration required".

Budgeting Methods

• 50/30/20 rule: The "50% needs" (the "housing, the food, the transportation, the utilities, the minimum debt payments") — the "30% wants" (the "dining out, the travel, the hobbies, the subscriptions") — the "20% savings and the debt repayment" (the "RRSP, the TFSA, the emergency fund, the extra debt payment").
• Zero-based budget: The "income minus the expenses = zero" — the "assign every dollar a job" — the "budget down to zero before the month begins". The zero-based budget requires the "detailed categories" and the "active tracking".
• Envelope system: The "cash-based budgeting" — the "physical envelopes for each category" (the "groceries envelope, the entertainment envelope, the transportation envelope"). The "envelope is empty = no more spending in that category".

Reducing Costs

• Housing costs: The "refinance the mortgage to the lower rate" — the "negotiate the rent" — the "get the roommate". The "CMHC mortgage loan insurance review" — the "eligible homeowners can reduce the CMHC premium".
• Food costs: The "meal planning" — the "grocery list" — the "buy in bulk" — the "store brands" — the "reduce the food waste". The "Canadian grocery price comparison" (the "Flyerify" — the "Flipp app" — the "weekly flyers").
• Subscriptions and bills: The "cancel the unused subscriptions" — the "negotiate the internet and the phone bills" — the "reduce the streaming services". The "bill negotiation services" (the "Billfixers" — the "NegotiateMyBill").

Emergency Fund

• Emergency fund target: The "3 to 6 months of the essential expenses" (the "rent, the food, the utilities, the transportation, the insurance"). The "single income household: 6 months". The "dual income household: 3 months".
• Emergency fund location: The "high-interest savings account (HISA)" — the "TFSA savings account" (the "tax-free interest"). The "no investment risk" (the "principal must be safe" — the "no stocks or the ETFs").
• Building the emergency fund: The "pay yourself first" — the "automated transfer of $50 to $200 per payday". The "windfall allocation" (the "tax refund, the bonus, the gift money goes to the emergency fund").

For the savings accounts and the banking, see our Banking Guide →. For the debt repayment and the consolidation strategies, see our Debt Management Guide →.