Personal Finance

How to Streamline Your Budget

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If your personal finances feel out of control, the best thing to do is go back to the beginning. Whether it’s the first you’ve ever made or a re-evaluation of one you’ve had for years, a budget is the basic building block. It is a breakdown of what you have coming in and where it goes. When you want to streamline your budget, you need to take three important steps.

1. Get a Handle on Spending

First, do you know how much you make each paycheck? Do you know how often you are paid? These may sound like silly questions, but with direct deposits, we can become detached from our paychecks.

Now track your spending – you can do this for a month, starting now, or you can look at the past few months, using bank and credit card statements. Either way, this should become a habit. You need to know where your money is going so you can spot money leaks.

2. Sketch Out Your Ideal Scenario

Lay out your goals. Are you focused on retirement? Do you want to buy a home or build an emergency fund? Now think about what your ideal budget would be. For example, if you want to ensure you are saving 10% of your income for retirement, this would be reflected in your ideal budget. Your ideal budget may not add up. You may show more going out than coming in. That’s because it’s a dream. But it will help you establish your priorities. And you have to start somewhere.

3. Put Your Money Where Your Priorities Are

Now you want to create a realistic budget that reflects your priorities. So if retirement is very important to you, make sure you put money into retirement accounts regularly. Try making that an automatic deposit. In fact, do the same for an emergency fund and a house fund (or whatever goals you’ve identified as being important).

You will likely slip up. There will be months where you use some of the emergency fund for a non-emergency like dinner out with friends. But the goal is to get closer to that ideal budget more consistently. You don’t have to be perfect, but you do want to be getting better.

Plus, you can re-evaluate your budget if circumstances change. It’s a good idea to look at your budget twice a year regardless. This way you stay in tune with how much money is coming in and where it’s going.

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