If you’ve started a family or a career, you’re no stranger to competing interests and that challenge of trying to balance paying today’s bills with saving for tomorrow’s needs. Saving for a child’s college education while paying down your own student loans is a financial challenge best aided by a budget. Why is that? Well, a budget helps you make better financial decisions by giving you a clear picture of what you’re working with, what you owe and balancing it all in accord with your personal financial goals and values.

Here’s how to make your first budget in four simple steps:

Step 1: Write Down Your Income

Whether you use a legal pad or a spreadsheet isn’t important. Do what works for you. Just write out all your sources of income. How much you’re getting each month, each year and special or infrequent incomes. If you’re looking for an easy tool to help you do this, check out Four Points Budget Spreadsheet.

Step 2: Record Your Expenses

Once you’ve gathered all the possible sources of income headed into your home, it’s time to write down your expenses. This would be all the bills you pay for necessary expenses (like your mortgage or rent, groceries, utilities, car payment, gas, etc.) and the expendable expenses that you can cut if you have to. Expendable bills can include cable subscriptions; magazine or club subscriptions and other things that you enjoy spending money on but wouldn’t necessarily need to survive.

This can often be the toughest part of budgeting. If you can’t get a wrangle on it all at once, just start tracking everything you spend for a month. Keep every receipt, write down every expense, or track them in your bank account After a month, you’ll have a snapshot of what you are spending your money on. Then, comes the exciting part – analysis.

Step 3: Look for Aliens in Your Budget

Now, we don’t mean little green guys in the sky, but by ‘aliens’ here, you’re looking for items that are out of place or that don’t belong in your budget. For example, you might come to the end of your process and see that you’re spending far more than you earn each month, which could be resulting in revolving credit balances. You might be spending more than you thought you were on eating out for lunch or dinner.

You want to analyze your budget and look for changes you can make to bring your spending below your earning. Ideally, you want to end each month with more money than you started with. This is only possible by taking a good long look at your finances and making changes so that you spend less than you earn each month.

Step 4: Align Your Budget to Your Goals

This last step is the most exciting because it is where you get to bring your spending in line with your personal goals. Do you love to travel? Do you want to set aside $100 per month for retirement? Do you want to stash away $50 a month into a child’s college savings account? You can do all of this by add them as line items into your budget. Then, look for ways to slash costs in other areas so you can apply that savings to your new goal-oriented line items.

You might find that you’re paying more than you should for your mortgage and that a home loan from Four Points would free up some money each month to put toward college savings. Or, you might decide that opening checking and savings accounts with Four Points would allow you to automate savings payments each month, making saving for retirement that much easier.

Whatever you decide, you’ll quickly see that creating a budget puts power in your hands to fuel your dreams!

What questions do you have about making a budget? When did you first realize that you could benefit from a budget? What is your big dream that a budget could help make possible?

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