How much money you do spend every month? Can’t answer that? Does it concern you? Join the club and read on.

Budgeting, tracking expenses – or whatever you want to call it – is a daunting task for most of us…and I mean “us”! With a young family of our own it feels like our money is flying out the door every time we blink. It’s quite scary sometimes. Recording every dollar we spend is a massive undertaking. Trust me, I’ve tried it and it never takes.

So, what’s the answer to the budgeting dilemma most of us face? I have come up with the most simple and irrefutable way to figure out monthly expenses. Call it your “burn ratio”, household budget, lifestyle expenses, discretionary income, surplus funds…whatever you like, it’s all the same. Here’s how to do it….

  1. Look at you last year’s tax return to get your total income (line 150 of your T1 General) – that’s what you earned from all sources and if you don’t have it ask your accountant for it
  2. Subtract total tax payable (line 435 of your T1 General)
  3. Subtract regular mortgage and loan payments (multiply monthly payments by 12 to get annual totals)
  4. Subtract contributions to all savings plans (look at either your bank account or investment statements for this information)
  5. Subtract insurance premiums (home, auto, life, health)

The leftover is what you spent last year. Divide it by 12 and that’s what you spent every month – and there’s no denying it. I really don’t care how it was spent. That is a personal thing. Although I do enjoy watching Gail Vaz-Oxlade telling people how much to put in each money jar….her approach works well too. Really well! But good luck with it.