The simplest approach to budgeting is a three-step process:
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Set Your Goals
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Track Your Expenses
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Change Your Spending
Download the following tools to get started:
But, start with Step 2.
Track Your Expenses
Write down every place you spend your money. Use a note pad, or keep receipts in an envelope or use our pocket spending tracker. Just fold the tracker so that you can carry it in your wallet. Every time you spend money, write it down. Track your expenses for thirty days. Make sure you include irregular expenses such as gifts, vehicle and home maintenance, dentist, clothing and insurance. Estimate annual amount for irregular expenses and divide by 12 to determine the monthly amount to be set aside for these items.
Now, go back to Step 1.
Set Your Goals
Once you’ve seen where your money goes, consider what you could do with that money instead of where you are spending it. For example, if you have 2 cups of coffee a day at $2 each, that’s $1,200/year. Determine short, medium and long range financial goals. Once you have planned your goals and tracked your spending, it becomes easier to prioritize your spending and save to achieve those goals.
Change Your Spending
There are many ways you can change your spending patterns to help you achieve your goals:
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Develop a realistic budget
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Don’t spend more than you make
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Save regularly
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Pay bills on time
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Use credit wisely
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Review your budget plan and re-evaluate your spending patterns