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Illustration by Erick M. Ramos


Welcome to the first dispatch from MoneySmart Boot Camp – I’m so glad you’re here. My name is Erica Alini, I write about personal finance at The Globe and Mail. Let’s dive right in.

The key concept I want to talk about today is: Spend less than you make. That’s the foundation of any kind of healthy relationship with your money. There can be no saving, investing or financial planning unless you’re able to set aside some cash at the end of the month. But how exactly do you do that?

The concept is obvious, the execution much less so. Personally, it took me years to perfect the art of managing my (and later my family’s) cash flow. Along the way, I realized that what works is a matter of personality and lifestyle. My dad, for example, is a track-every-cent kind of guy. I prefer a go-with-the-flow approach (more on that below). But the bottom line is that everyone needs a system.

Let’s take a look at three common ways to manage cash flow as well as a couple of “traps” that might keep you from reliably spending less than you make – and how you can get around them. Next, we’ll tackle savings. And at the bottom, you’ll find some activities to try on your own.

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Three ways to track your income and spending

Where is all your money disappearing to? You need a system to track your expenses – and your income, too, if you’re a freelancer or have more than one paycheque.

Here are three common ways to do that:

Old-fashioned budgeting: The kind of money-tracking typically done with a spreadsheet. You note your income in one column and your expenses – grouped by broad categories – in adjacent columns. At the end of the month, you add it up and take stock of how much, if anything is left. Going forward, you can set yourself savings targets and decide what expenses to eliminate or trim back. If you’re not sure where to start, there are many budget templates online. (This tool from Canada’s federal financial consumer watchdog allows you to create and download a personalized budget spreadsheet. You can also shop budget templates on Etsy.)

  • Pros: Some people thrive on the strict discipline of a budget.
  • Cons: Others find that constantly keeping tabs on their spending can be time-consuming and mentally draining.
  • Pro tip: Avoid budgeting with too many categories. “Coffee shops, takeout, clothes, pet, housing, bills – the list goes on … It’s so unrealistic! … Enough already. Budgeting like this sets most people up for failure,” writes financial planner Shannon Lee Simmons. All you really need is four larger categories, she argues.

Money buckets: Instead of columns, set up a few different accounts – what I like to call “money buckets” – to earmark money for various expenses and savings.

When your pay lands in your main chequing account, the first step is to set aside enough to cover your monthly fixed expenses, such as rent, utilities and any debt payments. Then you allocate the rest among your savings: Maybe that’s $500 for your monthly retirement contribution and $200 to your “vacation bucket” for a $600 long-weekend getaway that’s three months away. Here’s an example of how you can use multiple accounts to earmark money for savings and planned spending:

  • Pros: Compared with budgeting, this is a low-maintenance approach.
  • Cons: It may not work for absolute newbies. You have to have a pretty good idea of what infrequent expenses are going to crop up through the year and how much you should set aside for your longer-term savings goals.
  • Pro tip: Money buckets can quickly get pricey unless you’re using no-fee bank accounts. More details on that here (look for “map your cash flow”).

Budgeting apps: Let a bot do some of the work for you. Apps like YNAB (for You Need a Budget) and Mint, provided by Intuit Inc., allow you to create spending and saving categories and assign dollars to each of them.

  • Pros: As low-maintenance as money buckets, without the need for so many accounts.
  • Cons: If you want a budgeting app to automatically track and classify your expenses, you’ll typically need to allow it to connect to your bank accounts. If you have privacy concerns, this may be a turn-off. Also, these apps will either charge you a fee for their services or serve up ads for financial products based on what their algorithm has learned about you.
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Money traps

Financial surprises

Your laptop breaks, your client’s cheque bounces and your childhood friend invites you to their wedding. Anything that unexpectedly blows up your spending or scrambles your income can throw your finances off track.


  • Expect the unexpected. Set up an emergency fund for what you can’t predict. Without some rainy-day cash, you’ll have to borrow to cover what you didn’t plan for.
  • Practise year-round cash flow planning. Did friends’ weddings also dig a hole in your wallet last year? It’s a sign you should expect that kind of expense. Looking at your spending patterns throughout the year can help anticipate and plan for infrequent expenses so they’re no longer surprises.

Impulse spending

Resisting temptation is exhausting so make it easier on yourself to stick to the plan.


  • Erase your credit card info from online shopping accounts.
  • Pay with debit or cash for anything but bills or use a prepaid debit card for “fun spending.”
  • Automate your bill and debt payments as well as transfers to your accounts for longer-term savings.
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How much to save and for what

It’s hard to save when you don’t know what you should be saving for and how much you should squirrel away.


  • Emergency savings: The general rule is to set aside enough cash to cover three to six months of living expenses. If that seems daunting, aim for the equivalent of one month of rent at first.
  • Savings with a clear timeline and end amount: You need $3,000 for a beach vacation in six months or $80,000 for a down payment in five years. Work your way back to how much you need to set aside monthly or biweekly (depending on how often you get paid). If the math gets tricky, here’s a handy-dandy calculator.
  • How much to save for retirement. That’s a tough one, especially when you’re young and not sure about when you’ll retire and how much income you’ll need. Some financial planners recommend working backward: Figure out who much you need for essential expenses, debt payments and to establish an emergency fund. Then carve out a little more for retirement without nixing out all your fun spending, which isn’t realistic.

If you’re further along, head over to The Globe and Mail’s Retirement Readiness Calculator to gauge whether you need to save harder.

Picture this

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Try at home

  • Track your spending for a month.
  • Now check your cash flow for the past three months: How many surprise expenses did you have?
  • Spot your infrequent bills. From annual subscription fees to property taxes, there are plenty of them that don’t come due every month. See whether you can switch to monthly billing or plan ahead and save for them monthly.
  • Now track your variable expenses for a year: From clothing to car maintenance, how much would you have to set aside every month to cover them?
  • POWER-UP MOVE: Once you’ve got a handle on inflows and outflows, try to automate some of your bill payments and savings.

UP NEXT: How to use debt (and not let it use you).

If you like this newsletter course, you might also like Stress Test, The Globe’s award-winning personal finance podcast for Gen Z and millennials. Listen for free wherever you get your podcasts.

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