Payday feels great, and then somehow the money is gone before the month is over. A budget is a plan for your money: how much comes in, where it goes, and how much you keep. It does not have to be strict or complicated; it just has to add up. Budgets matter most when something changes. If your shifts get cut, your rent goes up or you start saving for something big, a written budget shows you exactly how much has to change and where. This lesson uses percents, rates and a bit of algebra to build a budget and then adjust it.
Income: gross pay and net pay
Gross pay is what you earn before anything is taken off: hourly wage × hours worked. Your employer then takes deductions off, such as income tax, Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums; how much depends on your age and how much you earn. What is left is net pay, your take-home pay, and it is the number to build a budget on. In Ontario, the student minimum wage is $16.90 an hour from October 1, 2026 (for students under 18 who work 28 hours a week or less during the school year, or who work during school breaks). At 12 hours a week that is dollars of gross pay per week. To change weekly pay to monthly pay, multiply by 52 weeks and divide by 12 months: a month is about 4.33 weeks, not exactly 4.
Expenses: fixed, variable and savings
Fixed expenses stay the same from month to month: rent, a phone plan, a transit pass, insurance. Variable expenses change depending on your choices: groceries, eating out, entertainment, clothing. Savings are money you deliberately keep, for a goal or for an emergency fund that covers surprise costs like a broken phone. A budget balances when net income equals expenses plus savings. If income is bigger than spending, you have a surplus; if spending is bigger than income, you have a deficit, which means borrowing or using savings to cover the gap. Many people "pay themselves first" by moving savings out on payday, before spending starts.
| Category | Type | Monthly amount (dollars) | Percent of net income |
|---|---|---|---|
| Rent | Fixed | 1,120 | 40% |
| Phone plan | Fixed | 84 | 3% |
| Transit pass | Fixed | 140 | 5% |
| Groceries | Variable | 420 | 15% |
| Eating out and entertainment | Variable | 280 | 10% |
| Clothing and personal care | Variable | 196 | 7% |
| Savings | Savings | 560 | 20% |
| Total | 2,800 | 100% |
Adjusting a budget when things change
Suppose your hours are cut and your net income drops 10%, from $2,800 to $2,520 a month: $280 less. Fixed expenses usually cannot change right away (the rent is still due), so the gap has to come out of variable spending, savings, or both. In the figure, the variable spending drops by 196 dollars and savings by 84 dollars, and . Rent increases work the same way in reverse: a cost goes up, so something else has to go down. In Ontario, the 2026 rent increase guideline is 2.1% for most rent-controlled units (Government of Ontario); most units first occupied as homes after November 15, 2018 are exempt from rent control, so the guideline does not cap them. A $1,120 rent can rise to dollars, which is 23.52 dollars more each month and dollars more each year.
- Write down the new monthly net income.
- Subtract the fixed expenses (with any new amounts, such as a higher rent).
- Compare what is left with your planned variable spending and savings to find the shortfall (or the extra).
- Cut variable spending, savings or both to cover a shortfall; decide where extra money goes before you spend it.
- Check that the new budget balances: income = expenses + savings.