If you are like most Americans, you may find that you are spending more than you are saving, which can create an endless cycle of debt as a result. We’re all guilty of spending a bit too much money at times and it’s an easy routine to fall into. Luckily, with some careful planning and discipline, you can reverse the cycle of debt and reap the benefits of saving money.
As many financial experts will tell you, the first step to climbing out of debt is to create a personal budget. Creating a budget amounts to examining your income and expenditures in order to determine exactly how much money you have coming in and where that money is going.
1. Question Your Needs and Wants
What do you want? What do you really need? Make two lists – one for needs and one for wants.
2. Set Guidelines
We all have different budgets based on our needs and wants. You may need to make adjustments for a daily coffee fix or your child’s school lunch money, so remember to subtract amounts from other areas if you do.
3. Track, Trim and Target
Once you start tracking, you may be surprised to find you spend hundreds of dollars a month on eating out or other flexible expenses. Cutting back is usually a better place to start than completely cutting out. Be realistic. It will help you to be better prepared for unexpected costs.
This chart shows some rough guidelines on how much of your income should go toward different expenses. This chart shows some rough guidelines on how much of your income should go toward different expenses. Keep in mind, these are only general guidelines and each individual should adjust the categories to fit their personal needs. For example, if a young person lives at home with his or her parents, the housing expenses category could be omitted and that percent of money could be distributed throughout the rest of the categories.

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*Source: Building and Budget - Guidelines- PracticalMoneySkills.com, 2008-2009