Making a budget is the first step toward financial freedom and living a life of joy and prosperity.

The first step toward successful money management is getting control over your money before it is even spent. The first step toward making a budget is taking stock of your current situation.

You can’t figure out where you need improvement unless you know where you stand right now.

If you were to sit down and make out a budget right now, you’d know exactly what some of your expenses are - rent or mortgage, car payment, etc. - but on the others, you may find yourself guessing.

For example, do you know how much you spend per month on fast food? Probably not, and chances are, whatever you would guess it to be, it’s probably much more than that. Small expenses like that tend to add up faster than you think they’re going to.

So when making a budget, the first step is to take a month and keep track of every penny you spend. That way, you’ll have an accurate picture of where all your money is going, which will help you decide which expenses to eliminate or reduce.

Another key element of making a budget is determining your income. Again, this sounds simple, but it’s not always. You probably know how much your paychecks are every two weeks (or however often you get paid). But are you forgetting other income?

Other income may include bonuses, overtime, money from a yard sale, for example. Perhaps, you receive interest on some account you never think about?

What about a secondary, irregular income that you or your spouse earns occasionally on the side? During that month where you’re tracking all the money you spend, keep track of all the money you bring in as well.

Once you’ve tallied your total actual expenses and your total actual income, you’ll be ready to start making a budget. If your income already outweighs your expenses, you’re in good shape. All you have to do in that case is reduce your expenses as much as you can and decide what to do with the extra income. Start with aggressively paying off your debts; move on to savings funds from there.

If your expenses currently outweigh your income, then you need to get serious and determine a reasonable plan, over a reasonable period of time, for getting out of debt – for good.

Examine your list of expenses ruthlessly and cut out the unnecessary ones. Be realistic, though. If you’re currently spending $100 a month on fast food, it’s highly unlikely you’ll have the willpower to cut that expense out altogether.

Instead, set a goal of no more than $50 a month on burgers and pizza, and take it from there.

Making a budget is not hard; sticking to it can be difficult, though, until new habits are formed. Rest assured, it’s the only way to gain control of your money and begin to start making your money work for you, rather than living from month to month and paycheck to paycheck.

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