A six-letter word that can take you from living pay-check to pay-check, to being able to enjoy the money you are making without stressing over your future. When you have a budget, you have the luxury of not having to worry about pinching every penny you make. It does take some time to get a working budget down packed but it is absolutely worth it. One day of crunching numbers, 30 days to make it a habit and BOOM! You’re well on your way to financial freedom.

Sounds Good? Great! Let’s get started.

The first thing to do is to find out what your numbers are. How much do you make, how much do you owe, and how much do you need. If you haven’t gotten these numbers down then make sure to read this post so we’re all on the same page.

Let’s do some math!

For all intents and purposes, let’s say that you make $35,000 a year. We’ll say this is after-tax just to keep things simple. On a monthly basis, you make about $2,900. Your job pays you bi-weekly, so you take home $1,450 at the end of each pay-check. Here are your expenses:

Monthly Expenses:

• Rent: $1,000 x month

• Debt : $200 x month

• Car and Insurance: $400 x month

• Groceries: $300 x month

• Utilities: $250 x month

• Savings: $200 x month

Together, you’re spending $2,350 a month. These are your necessities, how much money you need to put aside to live. That leaves you a full $850 at the end of each month.

Personally I like to take things in small increments so if I get paid bi-weekly, I divvy up my payment bi-weekly too. Working with smaller numbers, at least at the beginning makes it easier to work with.

Bi-Weekly Expenses:

• Rent: $500 bi-weekly

• Debt: $100 bi-weekly

• Car and Insurance: $200 bi-weekly

• Groceries: $150 bi-weekly

• Utilities: $125 bi-weekly

• Savings: $100 bi-weekly

Together your bills cost $1,175 and after putting aside all of your necessities, you’re left with $275 bi-weekly.

The money you need for necessities including your savings that are automatically taken out of your account so you don’t even have to worry about it. You can now use this money for the little luxuries in life, to kickstart your savings account or accelerate your debt repayment.

• Entertainment: $50

• Restaurants $50

This doesn’t mean you have to eat out every week but you put aside money every pay-check so that when that time comes when you want to go somewhere with friends you already have a savings account with enough money for a night out or a trip to the movies. You can say “yes” to your friends without even thinking about it because you have been saving this entire time.

See 5 Things To Know About Managing Your Finances

Look at your account. You still have $175 dollars left to spend how you please. Personally I would put the bulk of anything leftover into my Emergency Savings Account until I’ve covered 3-6 months’ worth of expenses, then send it straight to my investments but that’s just me!

You’ve now successfully created a budget.

This was the actual budget that I followed. It’s changed a bit since making more money but this is how I arrange things. At the time, I lived at home so I did not have rent to pay but I had a student loan of 7k, personal loans of 12k, a car of 14k and a high-interest credit to pay off with 5k balance.

Okay so not everyone’s life is this cut and dry and you may have different types of obligations. But that’s the beauty of a budget, you can pick and choose where your money goes. Got some credit card bills? Create a budget for it. Have some birthdays coming up? Create a gift budget. It’s not set in stone as things come up in your life you are inevitably going to make alterations but these are the skeletons that you can build from.

See How To Pay Off Debt