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Get a Handle on Your Finances

Does it seem as if your paycheck is here one minute and gone the next? If your spending-planmoney disappears before you know it, you might need a way to keep better track of your spending. A budget — or spending plan — can help you take control of your finances to make sure that you’re spending wisely.

Follow the Trail

The first step is to find out where your money is going. And the only way to do that is to keep track of everything you spend, including cash purchases. Ideally, you’ll be able to gather spending data for three months (although one month may be more realistic). There are software programs and mobile apps that can help simplify the process.

Add up how much you’re spending in specific categories during a one-month period, and use those figures to project your future expenses. To improve accuracy, add up any and all irregular expenses (insurance premiums, taxes, etc.), divide the total by 12, and include that amount as a monthly expense. Obviously, spending projections should not exceed your income.

Prioritize Your Expenses

Household expenses generally fall into two main categories. Non-negotiable expenses are the expenses you must pay, such as your mortgage or rent, utilities, phone service, and insurance. Groceries and any personal or student loans also fall into this category.

Negotiable or discretionary expenses are for things you want but don’t necessarily need, such as premium cable service, dinners out, and pricey vacations. If your cash flow is negative, reducing discretionary expenses will help you get from red to black.

Make Savings an Item

Your budget should include “savings” as an expense category. Direct the money into an emergency fund, a retirement savings account, a college savings account (if applicable), etc. Your budget should also reflect your priorities. You don’t necessarily have to give up expensive splurges, as long as you can fit them into your spending plan.

It will probably take some tweaking to finalize a workable spending plan, but it is well worth the time and effort.

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