Master your money by taking these simple steps

Quick notes

• People are more willing to use a credit card than to part with cash.
• Setting your bill paying, savings, and investing on autopilot can play a significant role in helping you reach your goals.
• It is often not the big expenses but the small, seemingly inconsequential ones that can throw a budget off track.

Setting and following a budget is often viewed as overwhelming and restrictive. It is actually neither of those things. By following a careful process and some budgeting tips, you can easily win at the budget game and find financial freedom.

Set your goals

Goals should be set before you look at the logistics. It is better to manipulate your money to fit your goals than to let go of goals to fit your money. While adapting goals is fine and often necessary, completely letting them go is not.

What are your financial goals for the next six months, year, five years, or even for retirement? Some common goals include:

• Pay off student loans
• Buy a car or home
• Open a business
• Take a trip to Paris
• Start a family
• Start college funds for kids

“It is better to manipulate your money to fit your goals than to let go of your goals to fit your money.”

Assess your current situation

An effective budget starts with an understanding of your financial situation. Do you currently make enough to pay all of your bills, take care of other necessities, enjoy some activities, and any other goals you hope to reach? If so, congratulations. If, on the other hand, you are like the majority of us, you probably have some work to do.

Calculate your income after taxes. Add to it any freelance work, investment dividends, and so on. List your monthly bills and usual spending, including any eating out you normally do, Netflix subscriptions, and morning coffee runs. Do you have anything left? Do you need to add some extra income or adapt your goals?

Be honest with yourself: What, if any, changes need to be made? What, if any, changes are you willing to make? Make a written plan for your money, and keep this plan visible.

Set automatic payments, savings deposits and investments

It is so much simpler to get bills paid and to save and invest when it happens without you thinking about it. With a little work, you can set a lot of your money moves on autopilot, increasing the likelihood of reaching your goals.

Use cash instead of cards

For anything that needs to be paid manually, use cash instead of cards. There is something about those little plastic cards that make us think the supply is endless. However, when it is cold, hard cash being forked over, we are more careful with it.

Label an envelope for each of the manual payments, including groceries and household goods. On payday, withdraw cash and split it in between the envelopes. When it is time to pay that bill or shop for those items, leave all cards at home. Take only the envelope with the allotted amount in it- this will prevent overspending.

Unsplash / Sharon McCutcheon 

Track your expenses

People usually find themselves wondering where all of their money went at the end of the month. More often than not, it is the little unplanned purchases that throw off your financial balance.

Sometimes, budgeters forget about the biscuit or burger they order from a fast-food restaurant. At other times, people do not add in the vending machine money at work because it is only taking a little change.

Track your expenses for a month or two. At the end of each month, categorize them and learn where your money is really going.

Find ways to cut down

With your tracked expenses in hand, take a hard look. Where can you make a dent? What are you willing to give up or cut back on? Can you carry lunch and snacks to work, and fix yourself a cup of coffee at home?

Also, look for a lower rate on bills, such as cable and internet, and try to cut back on how much electricity and water you use. Dig through every expense to determine what can be changed.

A deeper dive — Related reading from the 101:

Here are a few tips to help you cut some expenses.

Check out these common money mistakes to avoid.