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How to build a budget that actually works.

If you find it challenging to create and stick to a budget, you’re not alone. While it sounds simple enough to track money coming in and going out, many people forget to factor in all of their expenses — or focus on the big picture. The good news is that you can learn to create a budget that works for you without depriving yourself or cutting out all the fun.

Make your money work for you
Creating a budget — or spending plan — does more than show you where your money goes each month. It reduces financial anxiety, helps boost savings and puts you in control of your future and your goals. Here are four ways to build a budget that works for you.
  1. Identify your financial goals.
    Think of your budget as a roadmap to reach your personal goals — both short term and long term. That may include a down payment for a new home, a family vacation, paying off credit cards or simply purchasing a new winter coat. Choose goals you can get excited about and put them in writing.

  2. Review spending and income.
    Look at your total income and expenses for an accurate picture of your current financial situation. Remember to include semi-annual and annual bills, along with variable expenses like groceries, holiday and back-to-school shopping and vehicle maintenance. If you’re not already, keep track of all of your spending for at least a month. Write it down, or use online and mobile tools that make it easy to track spending on-the-go. You might discover that you’re spending more than you thought in certain categories, like food and entertainment.

  3. Prioritize.
    Keeping your goals in mind, rank needs and wants in order of importance in the following categories:
    • Fixed and essential expenses, like housing and car payments
    • Variable and essential expenses, like utilities and groceries
    • Variable and non-essential expenses, like concert tickets and nail care
  4. If you find yourself with less money than you’d like at the end of the month, find ways to trim expenses, starting in the non-essential categories. Consider your priorities and cut back in areas that aren’t as important to you, so you’ll feel less deprived. For example, could you cancel a subscription you don’t use or eat out twice a month instead of weekly?

  5. Put savings and fixed expenses on autopilot.
    Set up automatic payments that deposit a set amount in your savings account. By paying yourself first each month, you’ll make steady progress toward your goals and feel that much more motivated. You may also find it’s easier to save when you don’t see the cash in the first place.
Consider putting other routine bills, like utilities, car payments and credit card bills on autopay as well. When you hit a goal, keep making the same payment amount to your savings account—you’ll reach your other goals faster. Don’t forget to create an emergency fund for unplanned expenses, like car repairs. Having money set aside for emergencies can fill in the gaps without derailing the budget you’ve worked hard to create.

Tips for Sticking to Your Plan
Remember, the purpose of a budget is to make your goals more attainable. Keep your eye on the prize and follow these tips to make your budget work for you:
  • Revisit your plan periodically and make adjustments as needed
  • Consider using cash only for categories where you tend to overspend
  • Consider the big picture before making a purchase
  • Use automated tools to help monitor your budget, pay bills and save
Creating a budget that you can stick with and that helps you achieve your goals doesn’t have to be a chore — but it does take some organization and commitment. By staying flexible and being willing to make adjustments, the tips above will help you get on the right path and stay on track for the long term.