Budgeting tips for Gen Y clients

Young Canadians have embraced the importance of saving, but many don’t track their spending, reveals new research from TD Canada Trust.

More than half of Gen Yers (55%) save at least 10% of each paycheque, says the bank. However, most (66%) either don’t have a budget or don’t follow the one they’ve created.

This explains why young customers are most likely to overspend on entertainment (48%), snacks (41%), fashion (38%) and tech gadgets (29%), it adds.

“Cash flow [management] is essential [when trying to] gain control of where your money is going and ultimately reaching financial goals,” says Raymond Chun, senior vice president of TD Canada Trust. “It’s tough to start, but eventually becomes easier and more automatic.”

Read: 3 ways to help Gen Y

To help, offer these 3 tips to Gen Y clients and parents:

Create a budget template

“There’s a misconception that budgets mean complex spreadsheets, but this doesn’t have to be the case with a personal monthly budget,” said Chun. “An effective budget can be as simple as a sheet of paper with two columns: one for money coming in and one for money going out.”

The key to developing a good template is to allow space to capture all income and expenses in any given month, including discretionary spending. The “money out” column should allow space for everything from monthly rent and living expenses down to snacks and miscellaneous spends. “Money in” should include any incoming funds like paycheques and government rebates.

Read: Short-term goals increase planning success

Track spending

“Once you have a template in place, track [all] expenses,” says Chun. “A great starting point is to take advantage of virtual tools that are already tracking spending, and then build on anything additional that’s not tracked online.”

At the end of the month, all the documented expenses simply need to be categorized into essential and non-essential expenses.

Review spending habits

Look over your records and check whether changes should be made. While fixed expenses like rent and transportation likely can’t change, look closely at discretionary categories like entertainment, eating out and shopping. Set a maximum monthly spend for each category and consider putting extra cash towards a savings account or paying down debt.

“Always push yourself on whether it’s possible to put more money towards savings,” says Chun.

Read:

New money tools help teens think ahead

The kids are all right, says financial literacy poll