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Setting a Foundation for Financial Health

If you want to improve your finances, you need to start by learning the basics. Setting and sticking to a budget, saving money and paying yourself first are essential principles to master if you want to achieve financial success. You may also need to do some long-term planning, but your first step is to get the basics in order so that you have a firm financial foundation to work with.

Setting a reasonable budget for yourself is the first step towards improving your finances. You need to learn to live within your means so that you don’t incur credit card debt and can begin saving.

The first step to setting a budget is to keep track of your expenses for a month so that you can see exactly how much you make and how much you spend. You can get applications for your smartphone or computer to help you with tracking or keep track by hand in an accounting ledger. On the last day of the month, add up all your expenses and all your income. If your expenses are more than your income, you probably are relying on credit cards (or not paying some expenses that you owe.) You’ll need to cut expenses. If your income is greater than your expenses, you should still cut expenses so that you can save more. Put some of the excess that you saved at the end of the month into a savings account.

The end of the month is also a good time to look at the bills that are due the following month and make a plan to pay them. You should have an idea of when you plan to pay each bill; put the bill’s due date and the date you plan to pay the bill on your calendar. You may need to save money from each check to pay certain bills; include this in your budget as well.

Thinking so much about bills can be depressing or overwhelming; you may feel that you don’t get to do anything with your money except pay them. That’s why it’s also important to budget rewards money from each paycheck. You should put a small amount of money aside from each check for yourself. Either put the money into a special savings account designated for rewards or spend it on a small present for yourself such as a book, CD or clothing item. Make sure to pay yourself every week so that you can keep yourself motivated to save money and improve your financial situation.

You can do this work on your own, but it can sometimes be helpful to work with a credit counselor or financial advisor. These people are trained to look at budgets and credit reports and make suggestions that will optimize your financial health. If you feel overwhelmed or like you don’t know exactly what you’re doing, a credit counselor can help you learn how to budget or make suggestions about cutting expenses and increasing savings.

Basic financial management principles such as setting a budget may be confusing or overwhelming until you get used to them. However, investing time into learning how to set your financial foundation will pay off in the long run. Once you learn how to do this, you will be able to set long-term goals and reach them and your financial health will greatly improve.

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