BUDGET

It’s the scary B-word, I know. It gets a bad rap for being like a straitjacket, but that couldn’t be further from the truth. A budget doesn’t limit your freedom; it gives you freedom! A budget allows you to tell your money where to go each month rather than wondering where it went. If you want to be intentional with your income, start by creating a budget.

How to do it: I recommend using a zero-based budget. That just means your monthly income minus your monthly expenses equals zero. So, at the beginning of each month, list all your expenses. Include your rent or mortgage payment, cell phone bill, electricity bill, Netflix subscription—everything! Subtract those expenses from your income and work your budget until you reach zero. If you don’t get it quite right the first time, that’s okay! It normally takes about three months to get the hang of budgeting. Just remember: The goal is to give every single dollar in your paycheck a job to do.

PAY OFF DEBT

Debt payments don’t have to zap your paycheck. You can take back control of your income by making paying off debt a priority. It’s time to stop letting debt rob you of the very thing that helps you win with money—your income.

How to do it: Use the debt snowball method to get rid of your debt once and for all. Start by listing your debts from smallest to largest (regardless of the interest rate). Pay the minimum payment on all of them except for the smallest debt. I want you to attack that one. Once the smallest debt is paid off, take everything you were paying on it and roll it over to the next smallest debt—like a snowball. Keep doing this until you’re debt-free!

SAVE

Okay, we all know we should save, but do we actually do it? To help you remember to save, put your savings category at the top of your budget. That way, you won’t get to the end of your budget and realize you don’t have any money left to save.

How to do it: First, save up $1,000 as fast as you can (before you pay off any debt!). This will be your starter emergency fund. Then, once you’re completely debt-free, increase your emergency fund to three to six months of expenses. That should put a good buffer between you and life.

And as you’re saving, don’t forget about sinking funds! If you know you’re going to be in the market for a car or you have a vacation coming up, start saving for it in advance. It’s much easier to save a little bit each month than come up with a huge sum at once.

Used with permission from RamseySolutions.com.