create a budget that works for youFor most of us, creating, planning and following a budget is an important personal finance goal that’s often easier said than done. While some people lack the motivation to plan out a realistic budget, others may have difficulty following that budget after a few months. That’s why we decided to put together a guide that details how you can create a budget that works for you and what you can do to help yourself stick to that budget for the long haul.

Track your spending habits

The first step in creating a budget is to track your daily, weekly and monthly spending habits. By doing this, you’ll be able to see what you can do without (e.g., your daily coffee or weekly night out) and what you absolutely need to spend money on (e.g., your monthly bills, such as rent, cell phone bill, mortgage or a car loan). You’ll want to track your spending habits for a few months to get the best idea of where all your money is going, as you may spend money on one thing one month, and pass on it the next. While keeping a checkbook to note every time you spent money or swiped your debit or credit card was the main way to track your spending habits before, there are now numerous apps that can help you do the exact same thing, which makes budgeting a lot easier. Most major banks also provide features that allow you to track your expenses with their mobile banking app or by logging into their website, which is an alternative for those who’d rather not entrust their financial information to a third-party app or website. You can also stick to paper and pen (or a spreadsheet on your computer or Google Drive) if that suits you better — the important thing is to find a reliable way to track your spending habits month by month.

Calculate your income-to-spending ratio

After you track your spending habits and you see where all your money is going, you can better align your spending habits with your income and make the necessary adjustments. The first thing you’ll want to do is make a first round of cuts to your luxury expenses, such as weekly movie outings or that gym membership that you never really use. This should go without saying, but the money you have going out should never exceed the money you have coming in — failing to live within your means is the easiest way to get yourself into some serious credit card debt if you aren’t careful. If you’re spending more than you should be every week or every month, you may need to evaluate some things and make a lifestyle adjustment. Even if what you’re spending doesn’t exceed your income, you can still make a second round of cuts to your luxury expenses, as saving a few dollars here and there really adds up in the long run. If you notice that you spend a lot of money on coffee every day, for example, invest in a coffee maker for your home and make coffee to take with you on the go. Once you’ve made adjustments to your spending habits, you can see how much money you’ll have leftover and start creating some goals for yourself, which brings us to our next point.

Set goals for yourself, but be reasonable

By adjusting your spending habits to fit your income, you can see how much money you have leftover to work with and set goals for your financial future. Whether your goal is to create an emergency fund, save up for a large purchase, plan an overseas vacation or pay off credit card or loan debt, setting a goal is a great way to motivate yourself and have a concrete reason to stick to your budget. However, it’s important to be reasonable with what you can stash away in savings, as you want to give yourself a little wiggle room in your budget just in case something unexpected happens. This means that whatever you have leftover after taking care of your bills and expenses shouldn’t all be put into savings, just a portion of it. You will also want to make sure that you come back to your goals and update them as necessary throughout the year.

Update and adjust your budget regularly

Like many things in life, your budget won’t stay the same year after year, or even month after month. You may have a change of income or expenses (e.g., paying off a balance, a change in your household or acquiring a new credit card) and you’ll need to update your budget to accommodate these changes. This is especially important if you find that your budget isn’t really working out, or you find it hard to pay all your monthly expenses on time. Even if you don’t have any major financial changes in your life, it’s a good idea to take a look your budget from time to time to see if any adjustments can be made. This way, you can ensure that you’re always putting your best financial foot forward and maintaining a budget that works for you.

Digging into your financial life isn’t always easy. Follow our personal finance blog to learn more ways you can manage your money and credit.