Élyse, in her mid-40s, works as an office clerk. She is separated and lives in an apartment with her teenage daughter. Last spring, she put together a budget that saved her $4,200 in one year!
In March 2022, Élyse wanted to regain control of her debt and reduce monthly interest costs. After speaking with an adviser from the licensed trust firm Jean Fortin et Associés, she decided to go for debt consolidation. This allowed him to consolidate the balances owed on his four credit cards into one personal loan.
She will be able to pay off her $9,300 debt in three years and will end up saving $6,500 in interest expenses.
“During the consultation we took the opportunity to show Élyse how to develop a starting budget. This is a first draft, estimating the variable expenses and then testing them in real life for a few months. This first draft should always be created from an online budget, for example here: jeanfortin.com/budget. This type of tool ensures that we do not forget any expense items and avoid calculation errors,” explains Pierre Fortin, Licensed Insolvency Practitioner and President of Jean Fortin, Personal Finance Advisors.
Better control of personal expenses
Overnight, Élyse became aware of her spending and how it affected her budget, and she began to think twice about it. For example, she canceled Thursday lunch at the bistro when she had used up the weekly allowance for her personal expenses.
“We introduced for them the good old envelope system of our grandparents”, explains Pierre Fortin, who adds that it is very effective for discretionary expenses, which can very quickly become very “elastic”…
“I set aside $180 a week max for gas, grocery groceries, coffee, muffins, movies, a bottle of wine and my restaurants. Every Sunday I put nine $20 bills in a separate section of my wallet, and if there aren’t any left by Wednesday, it’s over spending until the following Sunday! Elyse.
Budgeting in three steps
A first budget should be created in three steps.
First, we calculate all of our fixed expenses (rent, car payments, insurance, etc.).
Second, we identify and assess irregular expenses (snow tires, car repairs, housekeeping, etc.), and finally, we estimate our variable expenses (groceries, clothing, spending money, gifts, vacations, etc.).
“This is the trickiest third step, because once we have set a theoretical amount for groceries, for example, we have to live with our budget to check if it passes the reality test,” notes Pierre Fortin.
As a result, Élyse had to make two adjustments in the first two months because their initial estimates didn’t quite reflect actual costs. Then she stuck strictly to her budget plan without feeling like she was depriving herself.
What was her surprise to find out lately that she had made significant savings of around $350 a month without really impacting her quality of life! Over a year, that’s $4,200, which she used to build an emergency fund. A great achievement that encouraged her to continue her efforts and stay on the right track.
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