By Mark Richards from Fairway Independent Mortgage in Ridgewood, NJ.

Having a budget that you adhere to each month is the quickest and best solution for saving money, paying down debt and investing in your future. However, if you are like most people, it can be difficult to stick with your plans even with the best of intentions. While some people find the word “budget” to be restrictive, a budget can simplify your life, reduce stress, and help you achieve your future financial goals.

Here are some tips on how to create a budget:

Know your income – Determine how much money you will earn for the month. Be sure to consider your regular salary as well as other sources of income you may have such as bonuses, alimony, child support, and interest on investments, etc. Seeing the numbers on paper of how much you earn versus how much you owe is an important part of being financially aware and may be a sobering look at how you are spending.

Calculate expenses – Figure out exactly how much you are paying out each month by consulting your bank statements, receipts and financial files. You can separate expenses into two categories: fixed expenses and variable expenses. Fixed expenses are payments that do not change each month such as mortgages, car payments, etc. Variable expenses are costs that change based on usage such as your phone bill, power bill and other utilities. Groceries can also be included in this category as well as clothing, dining and entertainment costs.

Create your plan – A realistic savings and debt payoff plan starts with investigating if you have a budget shortfall or overage. Simply subtract your expenses from your income. If you find that you are spending more than you are earning, it is time to eliminate some expenses. Prioritize your expenditures to determine which are important and cut back where applicable. Ideally, you want to have 10-20% of your income left each month to add to your savings account. Learn how to pay down debt and create an emergency fund by clicking here.

Record your spending – One of the best ways to stay within your budget is to record all of your expenses and income. By inputting your expenses, you are forcing yourself to be aware of where your money is going each month. There are many useful apps and websites to help you track your spending habits and maintain a budget. Here is a great one.

Budgets allow you to better handle having an excess of money or perhaps an unexpected shortage. For example, if you end up with more money than estimated, your first thought may be to splurge instead of save. With a budget, you will know if you have enough saved to warrant that purchase without incurring unnecessary debt. On the other hand, if unexpected expenses arise and you have budgeted correctly, you will be able to use your savings instead of relying on credit cards.

Whether your goals are saving up for your first home, moving into a larger home or just investing in your future, you can always rely on me to give you solid advice. I work with several financial advisors that I trust, and I would be happy to share their contact information if you need further guidance about investing in your future. Please know that I am always here to answer any questions you have and to be an ongoing resource for you.