I have often been asked by my Clients to provide them with a household budget to follow, since home ownership carries with it a certain degree of additional expenses. You should invest in a large accounting type book with tab indices, and divide this book into the following segments, and each segment into three columns titled "debit, credit, and balance".

a) General Ledger

This segment should account for the monetary accrual of all the following segments. Once a month you transfer (or deposit) to the general ledger segment enough money to carry the household for the next month. Then from this account, you export to each of the following sub-account enough money to carry the segment for the whole month. Since each segment carries its own balance, you can analyse rather easily which sub-account needs an increase or decrease, at any given time.
 

b) Groceries

This segment should show where you purchased, the amount spent, and the balance left in the account. Once a month you import from General Ledger a pre-determined amount that should cover the total grocery orders for the month.
 

c) Heat

This segment should reflect the monthly amount spent, and the balance left in the account. You should arrange with the gas, oil or electric company to give you a "budget" plan for year-round automatic monthly debits from your bank account. This facilitates budgeting.
 

d) Light

Same as heat above.
 

e) Home Insurance

Ask your insurance Agent if he/she will accept automatic payment withdrawals out of your account. You can get the name of an Agent from your Realtor.
 

f) Life Insurance

You should carry Term Life Insurance for the amount of the mortgage to protect all parties. You can obtain this insurance from an independent insurance broker or the lending institution. Before you choose to buy from the lending institution, please refer to my "web-site", there are cautions about this subject.
 

g) Car Insurance

Having car insurance payments come out of the household account prevents you from scrambling once a year to come up with the appropriate amount. Again, you should ask your Agent to withdraw monthly the payments from your account.
 

h) Water

If you are on city water, the household account should have a segment for payments.
 

i) Miscellaneous

This section is for unexpected debits within your household (ie rugs cleaned, driveway sealed, cable, painting etc). It should amount to at least 10% of all the other segments.
 
 

j) Property Taxes

Even though Municipalities only want their money three or four times per year, we don't always have the money required to pay. If you were to accumulate the money monthly, you don't have to go looking when the bill arrives. Some municipalities now will deduct money monthly from your account.
 

k) Mortgage Payment

This segment should show the principal and interest portion of the payment, as well as any accumulation you want to make to prepay your mortgage on the anniversary date. In other words, if your monthly payment is $1,000 but you would like to prepay an extra $1200 per year (which is $100 per month), you would transfer from the general ledger $1100 every month but show only $1000 going to the mortgage company. At the end of the year, you have accumulated that extra money so you write a separate cheque to your mortgagee.

If you buy or own a Condo, you can add a section for the condo fees.
 

l) Other Instalment Debts

You can further breakdown this section to individual requirements, such as child support, car loan, boat loan etc. Each loan should show the payment, the amount of interest payable, the amount of principal paid and the balance outstanding. When one loan is paid, you then increase the payment on another and so on.
 

m) Savings Plan

This is probably the most important segment of all. You should pick an amount you wish to salt away for a rainy day, and consistently deposit it to this segment each month. This could be your holiday account, Christmas shopping account, or retirement account. The amount deposited to this account should be 5% of the total of all the above segments.
 

Once a month you deposit the total of all the segments into the general ledger section, and then transfer from this area into all the separate sections. The reason you want to do it by section is that it will allow you to analyse to a greater degree of accuracy how much more or less has to be set aside to make ends meet. When you buy your first property, you should have enough saved up to make an initial deposit equivalent to the total of all the segments. In other words, you will be prepaid by one whole month for all your debts, that in itself can save you sleepless nights.