plan your budget

Easy Steps to Financial Freedom

A good budget is critical to managing your money. Follow these simple steps to plan a budget, and then see how to start saving for your future.

Manage your money right from the start. Visit the Practical Money Skills for Life site for a compilation of the best financial resources available on the Web.

Set your savings goals

Take inventory of your financial situation, and think about what you really want, both now and down the road. Setting these specific goals will help you follow your budget and stay on the right financial track.

Determine your total income

List all your income sources, including jobs, scholarships, loans, and gifts from parents. Be sure to use after-tax figures. Estimate on the low side, and don't include any unreliable income.

Outline your total expenses

Create a list of your expenses for a typical month:

• Fixed expenses: loan payments, rent, car insurance, tuition (a months portion)
• Flexible expenses: phone bills, ISP or DSL fees, groceries, clothes, entertainment

Be sure to include an amount for extra spending money to cover any unplanned expenses. Then add up all expenses to figure out your total monthly spending.

Compare your income with your expenses

Subtract your expenses from your income to get a budget starting point. If less than five percent of your income remains, or if the sum is below zero, it’s time to trim your spending. Maybe shop around for cheaper car insurance. Or cut back on eating out. And perhaps consider taking a part-time job to increase your income.

Set aside at least five percent of your net income for savings

Start building a savings account now so you’ll always be prepared for unexpected costs.

Maintain your well-planned budget

Every month, take a look at your expenses, especially if your circumstances—and your income—have changed. Set goals for yourself and work toward them. You may have to pinch pennies along the way, but it’ll be worth it in the long run.

Paying bills with your Visa card can help you streamline your money management—view all payments on a single statement and guarantee your bills are paid on time. Visit Pay Bills with Visa to find out how.

Follow the 20/10 rule to keep tabs on your debt

Never borrow more than twenty percent of your annual net income (after taxes). For example, if your annual net income is $6,000, your maximum safe debt load is $1,200. Also, your monthly debt payments should never be more than ten percent of your monthly net income. So if your net income is $500 a month, your monthly loan and bill payments shouldn’t be more than $50. To see if your debt is in the safety zone, use the Budget Worksheet.