Your budget can be a very useful tool, if you stick to it and revise it as necessary. No matter your income level, a well-constructed budget will help you live the best life possible, because it ensures your goals will be met, whatever they may be now and however they may change.

Here are some tips to help you manage your budget:

Tip #1

Set up an emergency fund in a savings account. Use the emergency fund to pay for unexpected expenses rather than using money that has been budgeted for another purpose. Use it only for true emergencies (not just extra money when you want some). A $1,000 emergency fund will handle most kinds of crises. Many banks and credit unions offer to "tie" your savings account to your checking account, so if you spend more than what’s in the checking account, they will tap your savings account. There is usually a fee for this, but usually it’s less than the cost of a bounced check.

Tip #2

Once you have $1,000 in an emergency account, open another savings account and start saving money for something that pays more interest, such as a certificate of deposit or money market account. (More on these financial tools later.) Savings accounts keep you on your budget, protect your financial well-being and help you build wealth.

Tip #3

Set your budget every month at roughly the same time. Many people do it on the first day of the month or at the beginning of their pay period.

Tip #4

Every few days, check your spending against your budget to see how you’re tracking. Move money around in the budget if you need to; the goal is to be aware of what’s happening so you can take care of problems when they are small.

Tip #5

At or near the end of the budget period, close the budget by doing one final check of spending against income. If everything looks good, file it and begin again. If you overspent, draw money from the emergency fund to balance. When you write the new budget, pay yourself back before you pay anyone or anything else. Skimp somewhere else! If there is anything left, you know where that goes, right? Savings!

There are two tricks to maximizing the usefulness of your budget: (1) understanding how the market economy impacts your budget and (2) doing routine financial planning to make the most of your income regardless of its size.

Neither is as hard as many people think.