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For young investors and savers, one of the challenges to allocating money to a saving or investing goal is to actually free up those funds and identify them.  One of the key ways to do that is to make those dollars a part of a budget. One of the attributes of successful savers and investors is that they know where their money is going.  Creating and sticking to a budget is a fantastic way to set yourself up for long term financial success. For many people, the idea of creating and sticking to a budget may seem hard, if not impossible.  However, websites and apps such as Mint.con can make this seemingly daunting task quite easy!


Here are a few steps to take when creating an accurate budget.


Identify your Net Income


The first step is to note the amount of money coming in each month. It’s easy to overestimate if you are using your total salary as what you have available to spend so remember to subtract your deductions. After taxes and any 401(k) or other retirement plan contributions, you are left with your actual take-home pay or net income.


List Fixed Expenses


Once you’ve noted your net income the next step is to track and categorize your fixed expenses. Make a list of every month’s bills such as mortgage or rent, car payments, and utilities. Fixed expenses are usually not the things that you’ll be able to cut back on. 


Next, make a list of variable expenses. A variable expense is something that changes month to month, such as entertainment, gas, and groceries, etc.. Often, there are a few things that can be changed in this category. If you’re having a difficult time remembering everything that you spend money on, take a look at bank and credit card statements. Many online bank accounts categorize your monthly expenditures. There are usually opportunities to adjust what you are spending on variable expenses. This is an area where a program such as can make this much easier and interactive.


Set Goals


What are you hoping to accomplish in the short and long term? For most people, a short-term goal is something you hope to accomplish in a year or two.   Certain things, such as saving for your child’s education, a future vacation home or retirement savings, are usually long-term goals and can take years to reach. Identify your priorities before you plan the budget so that everything is aligned. If you have credit card debt, which is usually very expensive debt, a great short-term goal would be to allocate some of your income to paying that down. Remember that you don’t have to write your goals in stone, if something changes it’s alright to alter things.


Adjust Habits Accordingly


Once you have documented your income and spending, it’s time to see what money is left to put toward your savings or investing goals.  If there is a gap, reviewing your variable expenses to see if there is anything that can be adjusted so that you could have money to put toward your goal is key.  A budget takes discipline, but it’ll be worth it when you pay off a debt that’s been looming over you or you’ve saved enough to take the vacation you are looking forward to.  Another benefit of this process is that you will have the confidence of knowing you have a very solid handle on your personal financial situation.


Stay on Track and Review the Budget Regularly


Once you’ve established the budget make sure that you’re consistently reviewing it. Things can change; a pay raise at work, an increase in expenses such as rent.  Things can and will change and you want to make sure your budget is set up to reflect any change that comes along. As mentioned earlier, technology can make this a very easy process.  Use things like to your advantage. You will be thankful for it.


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