The first step towards gaining financial freedom is to create a budget. The budget needs to not only be an accounting of how much money you have and how much your bills cost each month. It needs to be a guideline for how to spend your money so you can reach all of your financial goals. Don’t be overwhelmed, take these easy steps to build a budget for your life.

Expenses

The first thing you need to do is assess your expenses each month. Start with non-negotiable bills like mortgages, car payments, utilities, gas, and groceries. You will also need to make an honest accounting for any extra expenses you have each month, like entertainment, eating out, or buying clothes. These additional expenses might be more than you think, so make sure you go through bank statements and credit card bills to get an accurate number.

Some expenses don’t occur every month, like insurance payments or oil changes. Calculate how much these expenses are every year or six months and then divide to get how much you need to add to the monthly budget to cover those costs. It is also essential to account for unexpected expenses like car repairs or medical bills. Make sure you add a little bit each month into an emergency fund to cover those costs.

Income

Now that you know how much your expenses are going to be each month, you need to determine how much income you have each month. When calculating your income, be sure you are going off your net income and not gross income. Net income is how much of your paycheck you take home each month, so that is an accurate number to help your budget. It would help if you also accounted for any other sources of income that you might have when adding up your income.

Debt

You also need to make a list of all the debt that you have in your name. This could be your mortgage, car loans, credit cards, or student loans. Anything that you make payments on and how much you owe needs to be written down. Once you know how much you own, you should make a plan to pay it all off. The faster you pay off your debt, the more money you save because you will spend less on interest.

Plan for the Future

You will have expenses that you will need to plan for in the future. These can be tricky to prepare for, but luckily there are calculators online that can help you plan for the future. Online calculators can do everything from help you calculate an inch fraction to estimate the cost of a home improvement project.

Set Goals

Set goals for the future, but make sure they are realistic goals. Setting goals that you can’t reach will only make you frustrated and want to give up. Set goals that are attainable and goals that you can measure to make sure you are making progress. When you make a goal, be sure to break it down into smaller steps, so it is manageable.