The management of personal finances is something that everyone must face sooner or later. According to a poll issued by gobankingrates.com, “more than half of millennials have less than $10k saved for retirement.” In American households, Nerdwallet found that, “The average U.S. household with credit card debt has an estimated $6,929 in revolving balances, or balances carried from one month to the next.” With the knowledge of how little is being saved across America, we can put more effort into our own savings by simply following an easy budget. In this article, we will discuss the best way to manage money so that you can better your finances.

Your expenses are important to keep track of. By tracking spending and saving, you can begin to understand where you can scale back and save more. This consistent tracking can give you an idea of how much money you spend during a given month. You can start being saving all your receipts, taking note of how much cash you need versus how much you spend with credit cards, and calculating how much money you have before the end of the month. After the first month, add up how much you actually spent. Do not write down what you “would have wanted” to spend; write down what you “really” spent. Sort your purchases by categories in a way that makes sense to you. A simple list of your monthly expenses could be something like this:

Monthly income

$3,000

Expenses:

Rent / Mortgage: $800

Household bills (supplies / electricity / cable TV): $125

Groceries: $300

Dining out: $125

Fuel: $100

Medical emergencies: $200

Miscellaneous: $400

Savings: $900

If you don’t have receipts, don’t worry. You can refer to your bank statements or do your best to guess how much you typically spend in these categories. Now, write down the actual budget. Based on actual monthly expenses and your knowledge of your spending history, you can estimate how much of your income you will allocate to each category for each month. If you wish, use an online platform to budget, such as Mint.com, to help you manage it. In your budget, make separate columns for “planned” budget and “real” budget. Your planned budget is the one you want to spend in each category; this remains the same for each month and has to be calculated at the beginning of the month. Your real budget is what you end up spending; it changes from month to month and is calculated at the end of the month.

You do not have to structure your budget to include savings, but it is a very good idea to do so. Fidelity Investments Inc. advises at least 15% of your pre-tax income each year should be set aside for retirement. Be honest and realistic with yourself regarding the budget. Your month to month budget and actual expenditures may fluctuate, and that’s alright. As you continue to be more mindful of your spending and earning, scaling back in categories will become easier.