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How to Budget Your Money.docx
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Part 3 of 4: Becoming a Budget Pro

Don't go over budget. The first rule of budgeting, and pretty much the only one. It sounds fairly obvious, but it's easy to go over budget even when you have one in place. Be mindful of your spending habits and what your money is going towards.

Keep a journal. In the early stages of keeping a budget, it might be helpful to keep a daily journal of your spending habits. Write out what you spend money on each day. It could be eye-opening to track some of your expenses. Keep an eye for repeated purchases which might be easily avoidable, like a trip to Starbucks for coffee every morning.

Know the difference between luxuries and necessities. Determine what the have-to's in your budget are versus the want-to's. Make the necessities your highest priority in the budget and if there's money left over, indulge in things like going out or shopping.

Reward yourself periodically, but never with a blowout. As mentioned earlier, money has to work for you, not the other way around. If you feel like a slave to your budget, or to money in general, you're not going to end up happy. So feel free to get that fro-yo once a month, or treat yourself to a lunch away from the kids every so often.

At the same time, don't abuse your own rewards system to the point where it gets counterproductive. A gelato in a blue moon won't ever be a problem; but as soon as you reward yourself with big-ticket items, like $300 shoes, or a $2,000 mattress, your belt-tightening has just become a blowout. Kiss your budget goodbye.

Reduce larger expenses. These are often the most unpleasant, but most effective ways to stay within a budget. If you take an annual vacation, consider staying home this year.

Think about any "vices" you may have that are also pretty expensive. Cutting down on these is a good way to get more bang out of your buck and feel good about yourself while you're at it. If you smoke, look at ways you could quit. If you're a connoisseur of Courvoisier, consider cutting back.

Leave your debit/credit card at home. When you're out for the night, it's very easy (and tempting) to leave your debit or credit card at the bar and ring up a tab. Don't! This is a very easy way to ring up a high bill that will set you way off budget.

In fact, consider only spending cash and giving up your credit card altogether. Studies have shown that people who use cash instead of credit actually spend less money.[5][6] That's because people tend to feel the pain of parting with their money more when it's cash they spend; credit cards simply don't feel like cash, so your brain is more likely to justify the spending.

Part 4 of 4: Making Your Budget Go Further

Cut your taxes. This usually means taking better advantage of itemized deductions when you file your taxes every year. Start keeping your receipts, especially if you're an independent contractor, and research ways get a better refund.

Appeal your home assessment. If you're a homeowner and have sufficient evidence, you might be able to cut your real estate taxes by challenging the value that a home assessor puts on your property.

Stay ahead of inflation. Over time, inflation raises the cost of living. A three percent rise in prices annually doubles the cost of everything within 24 years. If your income starts to rise, don't start spending it on luxuries until you've made sure that you can stay ahead of inflation.

Don't count on windfalls. Don't factor in potential sources of revenue such as year-end bonuses or tax refunds. You only want to include guaranteed money into your budget.

Take your money out for the week at once. If you only want to spend $250 each week, go to the ATM on Monday and take it all out then. Once you run out of the money for the week, that's it.

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