“A budget is more than a series of numbers on a page; it is an embodiment of our values.”

-Barack Obama


Today we’re going to explore the not-so-fascinating topic of budgeting. This step immediately follows the much more exciting stage of goal setting, and it is where most people fall off the wagon. It’s the equivalent to someone getting all motivated by watching Arnold in Pumping Iron and then realizing that you have to lift weights to get ripped. Yep, you most certainly do.

The root cause of the problem most people have with budgeting is that they don’t understand what purpose it actually serves in their lives. Budgeting is usually associated with restrictions on spending, feelings of deprivation, and scarcity. It’s no wonder people are reluctant to start this process. What we need to do is to reframe the budgeting process, and start fresh.


Introducing… The Spending Plan


The transition between the goal setting and spending plan phases should be relatively seamless. Goal setting is the strategic direction you have set and a spending plan is the rough outline of the tactical implementation. In other words; creating a spending plan is about carefully selecting those things you deem essential for a fulfilling life and ensuring you allocate an appropriate amount of income towards them.

It’s like trying to purge your house of stuff. You have a choice. You can view it from a feeling of scarcity by reflecting on the items you are removing from your life. Or you can view it from a feeling of abundance by choosing to keep those items that you love and creating space in your house and in your life.

Creating a spending plan is not about restriction, it’s about being intentional with how you chose to spend your money.

If you so desire, you can even Marie Kondo your spending plan.

  • $1200/mo for my mortgage – This adds value to my life by providing shelter and a home to raise my kids. It has a prioritized place in my life and it’s value is in alignment with the time it takes to generate that income. Thank you mortgage payment.
  • $200/mo for a bi-weekly cleaning service. – This adds value to my life by freeing up time to decompress after a long working day and to maintain my sanity. Thank you cleaning service.
  • $90/mo for cable – This made sense before I purchased a $10/mo streaming service. I have better things to do than watch 2 hours of TV a night. Thank you cable, but I have to let you go now.

Since income available is finite, we use a spending plan to prioritize expenditures based on the joy or long term fulfillment each line item can give us. Though we would all love to never have to think about money, this is the same as having an overstuffed garage that we ignore. It’s full with every toy that ever caught our eye, and since we’re still bored we move onto the next shiny object a few weeks later and forget about all of the stuff piling up. Oh wait, that’s exactly what most people do with their stuff and with their finances.

Instead, what if we lined up all of our current spending and arranged them in order of the value each adds to our lives? We could then select the top items and discard the rest, knowing that we kept the most essential spending items that line up with who we are and what we value.


Spending, Values, and the Pareto Principle


For those of you not familiar with the Pareto Principle it is a concept adopted by an Italian economist, most commonly known as the 80/20 principle. It states that 80% of results come from 20% of effort, and it can be applied to a wide variety of applications.

  • 80% of profit is generated from 20% of projects in a corporation
  • 80% of your personal efficiency is a result of 20% of your time spent
  • 80% of sales comes from 20% of customers
  • …and 80% of the value you get is a result of 20% of your spending

The trick is to identify which 20% of your spending is resulting in 80% of the value in your life. It is extremely important to go into this process with a flexible mind, because spending plans are iterative; meaning that you make your best effort and then re-evaluate and adjust as you move forward. It is also important to understand that this is personal and unique to you and your family. What works for me, won’t work for you. What works for you, won’t work for your neighbours, friends, and family.




It doesn’t really matter if you use a napkin, spreadsheet, or a budget template to create a spending plan, but it has to be written down.

  1. Write down everything you think you need to spend money on in a big list. If you are doing this with paper, then put each item on an index card or a strip of paper. Don’t forget to include what we traditionally call savings in the mix. Put in a line item for debt repayment, retirement savings, vacations, and kids education. Don’t worry about how much each costs yet.
  2. Move these items around based on the value they have to you right now. Place the most important at the top. Basic necessities will be at the top such as food and shelter. Break out groceries and restaurants as two seperate items, even though they both qualify as “food”. Play around with the order until it feels right, sleep on it and discuss it with your spouse if applicable.
  3. Find or create a budget template. Personally, I use Gail Vaz-Oxlade’s template because it walks you through all major items and then categorizes them for you.
  4. Record your take home income. From both spouses. Include conservative estimates for irregular income sources such as a bonus, stock options, etc. Put this into a monthly or annual format, whatever makes sense to you.
  5. Start entering spending items from your prioritized list, from the top down. As you enter them into your spending plan, enter the actual amount or your best guess of each item. You will notice that your Income-Expenses will start to shrink rapidly.
  6. At some point down your list, you will notice that you run out of money. If you feel uncomfortable with the items that no longer make the list, then you have an opportunity to adjust your estimates and rejig the values. Under no conditions should you swap out items unless you are prepared to move them in your priorities list and accept the change.

Overall, the goal is not to find money for each item that you have identified, but to start prioritizing them against each other. Compare the desire to take a family vacation against the desire to put your kids in piano lessons or build an emergency fund. This gives you the very real, visceral experience that you have to prioritize spending across a variety of domains. Which is exactly what happens when you choose to go to Mexico instead of making an RESP contribution. No one wants to say they want to drink pina coladas over helping their kids go to university, but isn’t that what just happened? Bringing these choices to your awareness and consciousness is usually all you need to do to understand why you never seem to have enough.