Want to get a better handle on your finances, but don’t know where to start? There are tons of apps and tools to help you budget and manage your money, though I find many of these are complex and need a lot of effort to maintain. My view is that we’re trying to manage our personal spending, not prepare an audit-proof analysis for review by CRA. Keep it simple- the goal is clarity, not perfection.
In this series we’ll explore the basics of budgeting and money management, including:
- Spending analysis and how to reset
- Building a budget
- How to set up and use an emergency fund
We’ll start with a spending analysis as it’s the foundational step.
What is a spending analysis?
A spending analysis is simply a breakdown of how much you actually spend per month across different areas of your life. To do one, take your past 3 months of bank and credit card statements and note what you spent each month in each category. A few things to keep in mind before you start:
- Avoid holiday months. December and January tend to be distorted by seasonal spending, so if possible, pick three months that reflect a more typical stretch of your year.
- Don’t forget cash. Bank and card statements won’t capture everything — think about what you regularly spend in cash, like parking, farmers markets, or the occasional garage sale find.
- If you share finances with a partner, do this together. You’ll need a complete picture of household spending, and you’ll want to be on the same page when decisions come up later.
A typical set of spending categories might look like this:
- Housing — rent or mortgage, utilities, property tax, repairs, condo fees
- Food — groceries, eating out, takeout, coffee
- Personal — haircuts, clothing, personal care, medications
- Connectivity — cellphone, internet, cable, subscriptions
- Kids — daycare, clothing, activities, birthdays
- Pets — grooming, food, other
- Transport — transit, car payments, insurance, gas, repairs
- Debt repayments — if applicable
You’ll also want to track:
- Annual or occasional costs — gym memberships, seasonal expenses, anything that doesn’t hit every month
- Savings and dedicated accounts — holiday fund, home repairs, etc.
Making sense of what you find
Many categories will be relatively fixed — mortgage payments, bus passes, a monthly haircut. Others, especially food, will fluctuate week to week. By looking at three months together, you can average things out to get a picture of a “normal” month.
The point is to end up with a realistic picture of what you actually spend. Spoiler: it will likely be more than you expect, especially in areas like food (those takeout coffees really add up!) and connectivity. That’s okay — and it’s the whole point of doing this. You can’t change what you can’t see.
The reset: right-sizing your spending
If you’re not happy with where things stand, or if you’re looking to free up money to tackle debt or build savings, let’s talk about a reset. This isn’t about depriving yourself — it’s about getting honest about which expenses are genuinely adding value to your life and which ones have just quietly accumulated over time.
A lot of people find their budgets undone by small expenses that build up over the course of a month: daily coffees, multiple streaming services they barely use, subscriptions they signed up for and forgot about. A reset helps you see which of those things you actually miss.
The idea is straightforward: for one month, strip back all non-essential spending. Unsubscribe from streaming services. Cook at home instead of ordering in. Skip the extras. At the end of the month, add back only the things you genuinely missed. The ones you didn’t notice being gone? Let them stay gone.
Why a full month? Because new habits take three to four weeks to form. A shorter stretch doesn’t give you enough time to adjust and actually feel the difference. February works well for this — it’s short, it’s after the holidays, and there’s not a lot going on — but any four-week period will do.
It doesn’t have to be all or nothing
One thing worth saying: a reset doesn’t mean going cold turkey on everything. Maybe you normally grab a coffee every day and find that cutting it out entirely is just too much. Could having it once or twice a week — say, as a Friday treat — satisfy that need? There’s no judgement here about what fits for you. The goal is to find a level of spending that genuinely adds value to your life (or “sparks joy,” if you watched Marie Kondo) and let go of the expenses that don’t.
What to do with the savings
If you’ve done a reset for a month, you should find yourself with some extra cash at the end of it. If you’re carrying debt, put that money toward accelerating your repayments. If you’re debt-free, move it into savings — short-term first, then long-term.
You’ve taken the hardest step
Looking honestly at your own spending takes more courage than most people expect. It’s easy to have a vague sense that things could be tighter — it’s another thing to actually sit down and see the numbers. If you’ve done this, congratulations! You now have a clear, realistic picture of where your money goes, and that’s the foundation managing your money is built on.
Next up: building a budget — which will flow naturally from everything you’ve just done here.