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First steps to financial success in 2016 (upnorthlive.com photo)

First steps to financial success in 2016

(WPBN/WGTU) -- Navigating your finances can be tricky, and without a clear road map it’s easy to feel lost particularly when you’re starting out or just starting to take control of your financial world.

What is my first step to financial success?

The first and most important step to effective financial planning is developing and implementing a budget. That, of course, sounds easy and even simple. But it's more difficult than it seems. Budgeting simply means to live within one’s financial means, and is the only practical way to get a grip on your spending. Track your income and expenses for 30 days, and then create a spending plan you can live with.

How to Budget

You can make your own budget worksheet using either a pen and paper or a computer spreadsheet program. Think of your budget in terms of two things: money and time. Money, of course, is divided into its own two categories: Income and Expenses. Or click here for a useful and easy to understand home budget calculator to help get you started.

Follow these steps to make your budget worksheet:

1. List your income in a vertical column down the left side of the page. Think of all the sources of income (including paychecks and interest) that you receive. Also, consider how often this income becomes available to you. For example, are you paid weekly or every other week?

2. List your expenses below your income in that same column. Begin with major expenses such as a car payment, car insurance, food (including school lunches), clothing, and entertainment. Include all expenses, whether you pay in the form of a check, cash, credit card, or the amount is deducted from your credit union account. Remember to include any finance charges, such as interest on your auto loan.

3. Now, list the related timeframes in a row across the top of the page. For instance, does the expense or income occur weekly, per paycheck, monthly, quarterly, or yearly? Is the expense tax-deductible? If so, add a heading for this in your horizontal row. When you are finished you should have the beginning of a grid or chart. Use this as a worksheet to help you categorize and plan. When you first start using your budget worksheet, you might find that you change it often. That’s good! Your worksheet should be a working document.

4. Now that you have a “skeleton” worksheet, add anticipated expenses. Are you planning to go to college or participate in a wedding (as either a bridesmaid or a these require that you spend a lot of money. (Hint: Anticipate that you will have to spend more than you’d prefer, and budget accordingly. It’s better to be prepared than shocked.) You can also consider anticipated sources of income, such as the yearly birthday check from your Aunt Mildred. Be careful, though; don’t spend the money before you have it.

5. Don’t forget the “small stuff”! Do you buy soda pop or special coffee, eat lunch out, or buy snacks from the vending machine? If so, keep track of how often you do—and how much you spend. All of these purchases add up throughout the week, the month, and the year. So budget for these, or do without!

Remember: Use your budget as a tool to help you achieve your goals. Once you set up your categories and make it a point to record the appropriate dollar amounts, you’ll see how easy it is to continue recording your income and expenses.

The most difficult part is getting started. But once you have your plan in place, you’ll recognize the power of the information that you have at your fingertips!

If you already have a spending plan in place, look at ways to increase your savings including creating an emergency savings fund.

How does an emergency savings fund help you?

Financial advisers recommend an emergency fund to help with unexpected expenses. Essentially, an emergency is an event that puts your livelihood or your family’s safety at risk. The television dying, for example, is not an emergency. The furnace dying is. Regular, predictable expenses are not emergencies. While you may find it difficult to start a “just in case” fund, you can begin by keeping an extra $100 in your checking account. While having any money set aside is better than nothing, your goal should be to have at least enough to cover three to six months’ worth of expenses. This will give you peace of mind knowing that you have provisions for the unexpected, and you will not add to your debt when emergencies happen.

What is the quickest way to get out of debt?

Figure out how much you actually owe. Once you know where you stand, you are in a position to decide on your next steps. Debt consolidation, creating a spending plan, and credit counseling are all options to consider. Deciding which option will work best for you depends on your level of debt, your level of discipline, and your prospects for the future. If you’re not sure what your next step should be, talk with a professional. If you feel confident in your ability to create and stick to a repayment plan, create your own plan. Simply decide how much you can pay each month toward all your debts and make sure the amount you can pay is greater than all your monthly payments combined.

What else should I be saving for?

Once you have a budget in place, a plan to get out of debt, and an emergency fund for unexpected expenses, your next savings goal depends on your personal situation.

If you haven’t started, now would be a great time to start planning for retirement. See if your company has a 401(k) plan, and if it does, join it. If not, set up your own retirement fund and make regular contributions.

Click here for some helpful articles, tools and calculators to help you on your first (and hopefully continuing) steps to financial success.