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Four steps to better budgeting

If you’re looking for a better way to manage your finances, you can start by taking a few minutes to make a budgeting plan. Follow these four steps to get a clearer picture of how you’re spending, where you could be saving more, and how you can set yourself up for financial success in the future.

1. Get organized

Don’t just hope for better spending habits to materialize, set SMART (Specific, Measurable, Achievable, Relevant and Time-bound) goals for yourself. Make sure you have a balance of short, medium and long-term goals to maintain good money habits over time. Also, encourage your family to follow these goals and stick to an established budget together.

Start by calculating your own net worth—take the total value of all the assets that your own, then subtract all of the debt and liabilities that you owe. This number can provide a baseline to gauge your financial health.

To gain a more complete picture of your spending habits, it’s also important to consider the difference between fixed expenses—like rent, mortgage and insurance payments—and variable expenses—like utilities, dining and entertainment. Before you create a budget, make sure you separate your fixed and variable expenses.

To help you visualize your spending, you can write down your monthly expenditures in a journal, or use any of the helpful budgeting tools provided by First Tech.

2. Establish a budget

Make a spending journal that tracks all of your expenses. Reviewing your bank statements online is an easy place to start, but make sure you take note of your spending over a significant period of time, to get a more accurate look at your complete spending habits.

Categorize each expense into one of three categories: Necessary expenses, impulse buys and luxury items. Then, you can prioritize your expenses to create a spending plan. Fund everything on a monthly basis, and [NC1] use direct deposit or automatic transfers when possible. You can also use multiple savings accounts for specific needs that you might have, like car repairs, home upgrades or vacation.

When it comes to food and entertainment, there are a few simple tips that can help reign in spending. First, use cash only when possible and avoid shopping with your cards. Try to shop for food once per week and stick to your list, avoiding multiple trips and unnecessary extra items. Also, try to shop sales and take advantage of deals by using coupons and discount codes.

You should also review all of your insurance policies and ensure that you are getting the correct coverage. Understand how much coverage you have, and consider your coverage needs along with any potential life changes you are anticipating in the near future. Life changes that can affect your insurance include getting married, buying a home, having a child or moving in with family, among many other things.

To maximize savings on insurance payments, you can try paying a higher deductible (if you can afford it), and always keep your credit in good standing in order to lower your insurance premiums.

3. Take control of your debt
Start by calculating your debt-to-income ratio, which can help you manage your current financial obligations and also plan for the future. The context of your debt-to-income ratio is important, too—how did you arrive at this ratio, and has that number increased or decreased over the last two years?

Reviewing your credit report once per year is also a good idea, and you can do that for free by visiting You can actually pull your report from one of the three credit bureaus (Equifax, TransUnion and Experian) every 4 months to stay on top of your report free-of-charge.

This report is not the same as your credit score, which you may have to pay to obtain. However, you don’t need to know your credit score in order to know what is being reported on your credit report.

Interest also affects the money you save, so understanding the power of compounding interest is very important.

Interest % Payment/Month Total Balance
2% $200 $58,959
2% $300 $88,439
5% $200 $82,207
5% $300 $123,310
8% $200 $117,804
8% $300 $176,706


Interest % Payment/Month Months to Payoff Interest Paid
12% $200 48 $1,947
12% $300 29 $1,174
20% $200 60 $4,367
20% $300 33 $2,283
28% $200 91 $10,531
28% $300 38 $3,887

4. Enhance your income
You may be able to increase the amount you take home by adjusting your W-4 and making sure you are taking the correct number of tax allowances. Also, review any employer-sponsored retirement plans to make sure you are maximizing all benefits.

For more ways to spend smarter, save more and maximize your income, make the most of these helpful First Tech resources:

First Tech Calculators
First Tech Insurance Services
First Tech Articles