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Establish a Budget

Establishing a budget is the first step in getting on the path to responsible finance.  It’s hard to save or track where your money is going if you don’t have a budget to stick to. When creating your budget, take these steps into consideration:

  • Write down all of your financial goals. Whatever they are, both short and long term, include them on the list. These are the goals you’re reaching toward with your budget.
  • Take a tally of your income, including your salary, child support, interest, dividends, and any other monetary support you receive on a regular basis.
  • Make a list of your expenses, dividing them into two categories. You’ll have your fixed expenses, like your rent, phone bill, or other regular monthly costs, and your discretionary spending, which is your entertainment, shopping, and other voluntary expenses that happen when you choose. If you’re not sure how much you usually spend each month, take a look at past bank statements to help and be honest with yourself. Your budget won’t help you if you’re not tracking all of your spending.
  • Compare your income and your expenses, and see where you are. If your expenses are lower than your income, you’re on your way to saving! Look at the difference between income and spending and see if you’re saving enough to reach your goals. Think about how that money can better serve you, maybe by investing or putting it in an account where it will accrue higher interest. If your expenses are higher than your income, you’ll have to take a step back and think about what changes you can make. Is there anything that can be easily cut from your discretionary spending? Can you reduce any of your fixed expenses? It might be a good idea to buy your groceries in bulk, for example, it might be a good idea to buy your groceries in bulk, lower your thermostat, or call your car, phone, and other companies to make sure you’re getting the best possible rate.


To keep your expenses low and reach your financial goals even faster, follow these simple tips:

  • Don’t use your credit card for daily expenses because interest rates can add up fast and hurt your credit score.
  • Think about what you really need and want but only buy what you need.
  • When you do a great job saving, reward yourself with something small to help stay on track.
  • Keep in mind that your budget should allow for some flexibility.


Debt can be scary and often seem overwhelming to get under control, but it doesn’t have to be:

  • First focus on your credit card debt, because high interest makes it the most costly.
  • Make a list of your debts and rank them from highest interest rate to lowest, and pay the highest ranked first.
  • It might be a good time to consolidate all of your credit card debt onto a lower-rate credit card.
  • Make the minimum payments on all of your debt to avoid late fees.
  • Once your minimum payments start to go down, put the extra money you were paying before toward paying off the card with the highest interest rate.
  • A credit counselor can help you if you’re feeling overwhelmed.
  • Negotiate with your creditors, as some might consider reducing your debt rather than lose you as a customer or risk writing off the entire debt.


Student loans add up quickly, and though they’re a necessary expense it can seem like you’ll never pay them off. Here are some tips to help:

  • Some or all of your debt may be forgiven if you’re in the Peace Corps, work as a teacher, or are employed in another public service sector.
  • If you have extra money after cutting from your discretionary spending, use it to pay off the principal of your loans.
  • Talk to a lender about whether or not consolidating your loans is a good option.
  • Use unexpected income, like gifts, winnings, or tax income to pay off your loans.


It’s never too early, or too late, to start planning for retirement:

  • Think about what you’ll need once you retire, based on your current expenses plus any other needs you can think of, and add 3% per year for inflation. If your mortgage will be paid off by the time you retire, you can deduct that expense.
  • Health care is more important as you age, so add in an annual amount for health care spending.
  • Think about your future income, like social security, your work retirement plan, and any other income sources, and compare it to your future spending.
  • When do you want to retire? What is your estimated life expectancy? What growth rate can you expect to gain from your investments? These are all questions you should ask yourself when planning a retirement budget.
  • Now look at how much you’ll need to save per year to reach your goal, and create a savings plan.

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