- Figure out your after-tax income. If you get a regular paycheck, the amount you receive is probably it, but if you have automatic deductions for savings, and health and life insurance, add those back in to give yourself a true picture of your savings and expenditures. If you have other types of income — perhaps you make money from side gigs — subtract anything that reduces it, such as taxes and business expenses.
- Choose a budgeting plan. Any budget must cover all of your needs, some of your wants and — this is key — savings for emergencies and the future. One budgeting approach we recommend is the 50:30:20.
- Track your progress. Record your spending or use online budgeting and savings tools.
- Automate your savings. Automate as much as possible so the money you’ve allocated for a specific purpose gets there with minimal effort on your part. An accountability partner or online support group can help, so that you’re held accountable for choices that blow the budget.
- Revisit your budget as needed. Your income, expenses and priorities will change over time. Adjust your budget accordingly, but always have one. A budget is a plan for every dollar you have. It’s not magic, but it represents more financial freedom and a life with much less stress.
How To Budget in 5 Steps
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