Budgeting has long been thwarted by pre-existing creditor obligations. I say pre-existing because the debt spiral begins early in life with the first car loan or student loans. Many young people get enticed into using student credit cards which are carried forward after graduation. Budgeting for many only begins after debt. Even worse, budgeting for many only begins after some kind of crisis develops.

Like dieting, budgeting is useful at any age and under any situation. However, it is very difficult for many to organize a retirement plan when they have significant consumer debt. It is also difficult to purchase a home, which is another central objective of financial planning.

Another obstacle to successful budgeting is the avoidance of debt or the dependency upon credit. Many people subsidize their income and budgets with credit cards and lines of credit. Often they have noble intentions – an RRSP loan as they rush to get the $500 rebate for their maximum contribution to RESPs*. Tax reduction is high on a financial planner’s to-do list.

*No matter what your family income is, HRSDC pays a basic CESG of 20% of annual contributions you make to all eligible RESPs for a qualifying beneficiary to a maximum CESG of $500 in respect of each beneficiary ($1,000 in CESG if there is unused grant room from a previous year), and a lifetime limit of $7,200.

If people put too much into RRSP’s or RESPs they will top up their family budgets with increased debt obligations. This inevitably leads to an early cash out and for RRSP’s this means yet another debt obligation in the form of a tax liability. If you cash in the RRSP early, this defeats the whole purpose of retirement planning. So, we must remember that retirement planning is very different from the short term high of increasing your tax return. Retirement planning is long term. We need to be modest and certain we can afford the contributions over the span of our working careers.

Budgeting must be realistic. I have developed this budget worksheet based on my 36 year banking and credit counselling experience, which you can dowload for free:


There are many ways to translate budgets into practice. More on this later. If you have any questions regarding my approach to budgeting don’t hesitate to contact me.

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