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1. Track Your Income and Expenses
- Compile together all your different sources of income, such as wages, salary, returns on investments, or any other regular passive income.
- Maintain track of all your expenditures actively for at least a month. Separate your expenses into two categories: fixed (i.e. rent/mortgage/car payments) and variable (i.e. food/entertainment).
2. Set Out Your Financial Goals
- Set short- and long-term goals.
- This may include saving toward buying a house, paying debts or early retirement.
3. Create a Budget
- Set aside the income to be used in terms of expenses and financial goals.
- A budget can be a spreadsheet, a budgeting app, even pen and paper will work.
- Be sure that it is realistic and achievable.
4. Keep Track
- It is vital to always ensure that your income and expenses remain well within the limits of your budget.
- To make adjustments whenever necessary, when pertaining to keep your budgeting and tracking.
5. Be Flexible
- Life isn’t always predictable; therefore your budget is meant to be flexible enough to allow you to account for unexpected expenses or an income loss.
- Go over it consistently, and review your budget to update accordingly.
Top Tips for Sticking to Your Budget:
- Budgeting software: These tools are helpful for keeping track of your expenses and for staying on top of your finances.
- Automate your savings: Set it up so that every month some money automatically transfers from your checking account into your savings account.
- Cut back on discretionary spending: Find ways in which you can spend less without actually changing your lifestyle.
- Negotiate bills: Try calling companies that are providing service (like the phone, the internet, the credit card) and work towards a plan in which you can lower your monthly bill.
- Reach out for professional assistance if necessary: When issues arise with the formation of a realistic budget, a financial advisor or credit counselor might be appropriate and necessary.
