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<p>Finances are like a garden; if you're not paying attention to them, you might miss small issues that can crop up like weeds and grow bigger. That's why conducting a financial checkup is a smart idea. All it takes is a little time and guidance on what to dig into.</p><p>Regularly monitoring your checking account is helpful, of course, but doing this deeper dive at least once a year can help you manage your money even better. For a well-rounded analysis, ask yourself these six financial questions.<span style="font-size:11pt"><span style="line-height:107%"><span style="font-family:Calibri,sans-serif"> </span></span></span></p><img src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/financial-checkup_body-2_1035834404.jpg" alt="A customer meets with a financial planner to review her investments" class="right_image" /><h2 style="margin-bottom: 11px;">How's my credit score?</h2><p>A credit score is the main indicator of your financial behavior to a lender. It shows how likely you are to repay debt or make payments on time. Because lenders look at this number to determine whether they'll give you a loan (for a car or credit card, for example), having a good score — typically 670 or higher — is extremely helpful. If your score is lower than this, you may be able to successfully get a credit card or a loan, but the interest will likely be far higher than it would be for people with good credit.</p><p>Keep in mind that credit scores depend on good credit reports. This means you'll want to occasionally read over your credit report to spot any potential issues such as erroneous information or missed payments, which can drag down your score. Visit AnnualCreditReport.com for a free copy of your credit report; you're entitled by law to receive one from each of three major credit reporting agencies — Equifax®, Experian® and TransUnion® — once a year.</p><h2><br />Am I paying off my debt the right way?</h2><p>Most people carry at least some debt, such as a mortgage, car payments or student loans. The key is not only committing to paying it down but also making sure you have an actual <a href="https://www.lifeandmoney.citi.com/lam/articles/money/managing-money/how-to-pay-off-debt">paying-off-debt</a> plan that you're carrying out.</p><p>There's no magic number for the maximum amount of debt anyone should have, says Lisa Whitley, a Washington, D.C.-based accredited financial counselor and chartered retirement planning counselor. But there is a difference in types of debt. If you have a mortgage or a car loan that you're easily paying off every month, this is "good" debt, according to Whitley. It's the "bad" debt that needs to be taken care of, she adds. For instance, if you've taken out a high-interest payday loan, you'd want to pay that off as soon as possible to avoid the mounting fees that can plunge you deeper into debt. </p><img src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/financial-checkup_body-1_1319763433.jpg" alt="A couple meets with a financial advisor in their home" class="right_image" /><h2 style="margin-bottom: 11px;">Am I saving enough?</h2><p>Even if you are dedicating funds to paying down debt, building up your savings at the same time is also important for your financial future. Consider setting aside money in these three buckets:</p><ul><li>An emergency fund. If you aren't reserving any amount for big, unplanned purchases, like new brakes for your car, you may end up having to borrow money to fix them, which can increase your debt. Generally, experts suggest trying to save at least three to six months' worth of expenses, even if you have to start small and build this up gradually. This can ensure that, if you lose your job or have unexpected costs (for a medical need or otherwise), you could temporarily live off your savings.</li><li>Retirement accounts. You should be saving for your <a href="https://www.lifeandmoney.citi.com/lam/articles/milestones/retirement/the-new-retirement">retirement</a>, even if it seems like a long way off, because the more time you have to save, the more money you can accrue through employer-sponsored retirement programs such as a 401(k) or 403(b) plans or an Individual Retirement Account (IRA) to cover your living expenses. Keep in mind that the average benefit amount paid monthly by the Social Security Administration is currently $1,703.98 which may not meet all your needs.</li><li>A savings account. Consider creating a savings account to cover expenses that aren't necessarily an emergency but are nonetheless important to pay, like a replacement kitchen appliance or your child's overnight class trip.</li></ul><h2>Am I investing wisely?</h2><p>If you have retirement accounts set up or other investments (<a href="https://www.lifeandmoney.citi.com/lam/articles/money/managing-money/money-market-account-or-cd-account">certificates of deposit, money market accounts</a>, <a href="https://marketinsights.citi.com/Financial-Guidance/Investing/Mutual-Fund-Basics.html">mutual funds</a> or stocks, for example), you'll want to look at them, on your own or with a pro, to make sure they're on track and growing your retirement fund. If you don't, this could be a good time to talk to a financial advisor, who can advise you on making investments that could help build wealth for your retirement or, say, a down payment on a house.</p><p>But before you do this, Whitley says, review your objective goals — for example, having enough income for your kids' college education, for your retirement or to put toward a business you've always dreamed of running. Ask yourself: Have your priorities changed? Has your time horizon shortened or lengthened? Have circumstances shifted, affecting how you intend to use this money in the future? If so, you may want to save even more money or reallocate what you're putting into your various goal-focused buckets (say, education, retirement or new business). "Notice that none of these questions have to do with market performance," Whitley says. "You are on the right track when your portfolio matches your investment goals and that does not change with the ups and downs of the market."</p><p>It's worth noting that if investing isn't on the table for you right now, opening an interest-bearing savings account can be a good entry point. You can <a href="https://www.lifeandmoney.citi.com/lam/articles/money/savings/what-is-systematic-investing">contribute money to it on a schedule</a>, such as at every pay period or monthly. Once that habit is established, you might want to consider more advanced investing.</p><h2 style="margin-bottom: 11px;">Do I have enough insurance?</h2><p>It's easy to forget that insurance is a form of money management. "Insurance in some form or another has existed in human society for millennia for the simple reason that without it, we would not be able to afford to take any risk in our lives," Whitley says. "Without insurance, you have no option other than to absorb the economic consequences of risk yourself."</p><p>Consider homeowner's insurance, for example: If you didn't have it, "could you save enough money to hold in reserve to rebuild your home?" Whitley asks. "Most people cannot, so insurance is a form of leverage that allows you to spend a smaller amount of money, the premium, to guard against a risk that you would not be able to absorb on your own."<br /><br />Look over your current insurance policies to determine whether they offer you enough coverage. If, potentially, they don't, you may want to discuss that with an insurance broker and ultimately change your policy so that you're well protected. Your premiums would then go up, but paying a bit more in the short term may be worth it if it decreases the risk of leaving yourself or your family lacking sufficient coverage in the future. You might also want to explore insurance policies you don't already have, such disability or long-term care (this may cover home health care or assisted living home expenses) and think through how these might protect your finances if something were to happen to you.</p><h2>What estate planning should I be doing?</h2><p>This is another form of financial planning that is commonly overlooked since it requires thinking about topics many of us would rather not consider. It's important, however, because if you pass on without legal documentation such as a will, the courts in your state will decide who gets what, and this can create a mess of red tape for your relatives. Whitley advises thinking about reviewing an estate plan or <a href="https://marketinsights.citi.com/Financial-Guidance/Trust-Estate/">starting one</a> to make sure your affairs are in order. "An estate plan does you, as the deceased, no good at all," she says. "It is an act of love for the people you leave behind."</p><p><em>— With additional reporting by Geoff Williams and Life and Money by Citi editors</em></p>

It's Easy to Give Yourself a Financial Checkup — Here's How

<p>When it comes to making good financial decisions, it helps to start with some basics: taking time to understand your finances and regularly monitoring your spending and saving.</p>
<p>A good first step is determining your goals. Are you saving up for something big &mdash; tuition, a new car, a wedding? Or maybe you want to get a jump on building up a nest egg or are looking to slow down spending after a&nbsp; month of big purchases. Once you firm up that purpose, it&rsquo;s easier to &nbsp;take action and focus on <a href="https://www.lifeandmoney.citi.com/lam/articles/well-being/in-the-moment/how-to-improve-financial-wellness" data-link-source="tiny">improving your financial wellness</a>.</p>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/tips-for-managing-money_body.jpg" alt="A young family reviews their budget on a laptop"></p>
<h2>Create a budget</h2>
<p>To make sure you're consistently spending in line with your income, it's a good idea to draft a budget. Start by recording every dollar you spend; it's the only way to know exactly where your money goes each month. You can do it in either of these ways:</p>
<ul>
<li>Write it down. Go the traditional route and record all your expenses &mdash; even the smallest ones, like a coffee &mdash; in a notebook or <a href="https://www.lifeandmoney.citi.com/lam/articles/money/productivity/bullet-journal-financial-planning" target="_blank" rel="noopener" data-link-source="tiny">bullet journal</a>. Categorize these expenses into groups like groceries, clothing and transportation. You'll be able to see how quickly they add up, and you might spot areas where you can cut back.</li>
<li>Go digital. Try mobile banking or a budgeting app you trust to track your spending. With this method, you may be able to organize and categorize your purchases more seamlessly.</li>
</ul>
<h2>Set&nbsp;savings goals</h2>
<p>Not sure how much you should have in savings? One good guideline, according to most financial advisors, is to start an emergency fund that could cover three to six months of expenses. That may sound challenging, but you can start with a small amount and build it gradually.</p>
<p>While you're doing this, you might&nbsp; also want to sock something away for bigger expenses like <a href="https://www.lifeandmoney.citi.com/lam/articles/milestones/weddings/modern-wedding-trends-and-budgeting-explainer" target="_blank" rel="noopener" data-link-source="tiny">a wedding</a>, a house or <a href="https://www.lifeandmoney.citi.com/lam/articles/travel/destinations/6-destinations-youve-never-heard-of-seth-kugel" target="_blank" rel="noopener" data-link-source="tiny">a vacation</a>. One way to do this is to have a portion of your paycheck (say, 5% to 10%) automatically deposited directly into your savings account. Keeping this money out of your checking account can help you avoid the temptation to spend impulsively. You can even give your savings account a name like &ldquo;My Next Car&rdquo; to motivate you to continue putting funds there.</p>
<p>Saving for retirement? You may want to consider setting up an individual retirement account (IRA) or contributing to your company's retirement plan (e.g., 401(k) plan). Both 401(k)s and IRAs offer tax benefits, either when you contribute money or withdraw it, but keep in mind there are usually penalties for an early withdrawal.</p>
<p>It can also be smart to diversify your saving methods when you can. For example, low-risk, higher interest savings options such as <a href="https://www.lifeandmoney.citi.com/lam/articles/money/managing-money/money-market-account-or-cd-account" target="_blank" rel="noopener" data-link-source="tiny">CDs or money market accounts</a> typically earn more than a regular savings account. You'll want to think through the pros and cons to figure out the best approach for you.</p>
<h2>Maximize a 401(k)&nbsp;</h2>
<p>If your company offers a 401(k) plan or other type of retirement plan, depending upon which type of company you work for, take advantage of it &mdash; it's never too early to start <a href="https://www.lifeandmoney.citi.com/lam/articles/milestones/retirement/the-new-retirement" target="_blank" rel="noopener" data-link-source="tiny">planning for retirement</a>. Contributions reduce your taxable income and, on top of that, companies often match 3% to 6% of employee contributions, in effect doubling your savings. To make the most of compounded interest, it's helpful to invest early in your career and often. You may want to set up automatic deposits so that a designated amount of your paycheck goes right into your 401(k) or other type of plan.</p>
<h2>Get guidance from a financial advisor</h2>
<p>Consulting a professional for a <a href="https://www.lifeandmoney.citi.com/lam/articles/money/managing-money/save-money-with-a-financial-checkup" target="_blank" rel="noopener" data-link-source="tiny">financial checkup</a> is often worthwhile. Financial advisors can help you establish long- and short-term savings goals, develop plans to <a href="https://www.lifeandmoney.citi.com/lam/articles/money/managing-money/how-to-pay-off-debt" target="_blank" rel="noopener" data-link-source="tiny">pay down debt</a> and offer advice to help you <a href="https://www.lifeandmoney.citi.com/lam/articles/money/finance-101/how-to-get-and-keep-a-good-credit-score" target="_blank" rel="noopener" data-link-source="tiny">improve your credit score</a>.&nbsp;</p>
<p>They can advise you on how to consolidate accounts, diversify and make changes to your investment portfolio. However, asset allocation and diversification do not guarantee success or protect against loss.</p>
<h2>Be strategic with credit and credit cards</h2>
<p>Understanding <a href="https://www.lifeandmoney.citi.com/lam/articles/money/finance-101/credit-101" target="_blank" rel="noopener" data-link-source="tiny">how credit works</a> is key to bringing your financial picture into focus. One important aspect is your credit score, the number that represents the information contained in your credit history. This number is checked by renters, lenders, and utility and cell phone companies, among other businesses, so a high score is a valuable goal.</p>
<p>One way you can build credit is by applying for a credit card and demonstrating responsible credit card use. You'll want to first evaluate the terms and conditions of the credit card reward program as well as the costs associated with that card before choosing to apply (or when you're reassessing your current cards). Consider credit cards that enable you to earn something each time you use it, whether that means <a href="https://www.lifeandmoney.citi.com/lam/articles/money/managing-money/guide-to-best-cash-back-credit-cards" target="_blank" rel="noopener" data-link-source="tiny">cash back cards</a>, <a href="https://www.lifeandmoney.citi.com/lam/articles/money/rewards/travel-credit-card-rewards-tips" target="_blank" rel="noopener" data-link-source="tiny">travel rewards cards</a> or <a href="https://www.lifeandmoney.citi.com/lam/articles/money/managing-money/how-to-use-rewards-credit-cards" target="_blank" rel="noopener" data-link-source="tiny">points-based rewards cards</a>. You can put rewards toward reaching a goal, like a vacation, or toward gift cards.</p>
<h2>Evaluate your spending personality</h2>
<p>What kind of a spender are you &mdash; selfless, spontaneous or more of a planner? When you have a sense of <a href="https://www.lifeandmoney.citi.com/lam/articles/money/savings/saving-money-hacks" target="_blank" rel="noopener" data-link-source="tiny">your spending profile</a>, it can be easier to curb excessive spending and ramp up your savings. Impulse purchases can be tempting but they can also break your budget, so a better move is to save up for purchases instead. To start whittling away at your credit cards and loans, you might even want to embark on a <a href="https://www.lifeandmoney.citi.com/lam/articles/money/budgeting/how-to-save-money-by-doing-a-spending-fast" target="_blank" rel="noopener" data-link-source="tiny">spending fast</a> for a week or two. When you buy only what you need, you can be surprised by how much you're able to put away.</p>
<p><em>&mdash; With additional reporting from Life and Money by Citi editors.</em></p>

This expert advice can help you budget and save, avoid or reduce debt, and invest in your future.

Helpful Tips for Managing Your Money

<p>Here's how credit works, in a nutshell. A lender, card issuer, bank or grantor gives you a set amount of money to use with the expectation you'll repay it according to agreed-upon terms. Those terms can include repayment dates, required minimum payments, interest rates, fees and more.</p>
<p>Credit comes in many forms. Your own personal use of credit may include mortgages, car loans, student loans, credit cards, personal loans, home equity loans, or lines of credit and consolidation loans.</p>
<p>Your creditworthiness, meanwhile, is determined by your reported credit history. A credit report typically includes:</p>
<ul>
<li>The name(s) under which you&rsquo;ve obtained credit</li>
<li>Your current and prior addresses</li>
<li>Information on your credit cards and revolving lines of credit, such as the age of the account, the balance, your credit limit and the timeliness of your payments</li>
<li>Details about the loans that are in your name</li>
<li>Specifics of accounts that you may have closed within the last several years</li>
<li>Notes on any outstanding debts that have gone to collections</li>
<li>Notes on any bankruptcies, foreclosures and repossessions that have happened within the last several years</li>
<li>A listing of any businesses and individuals who have requested your credit report within the last two years</li>
</ul>
<p>Keep in mind that your credit report won&rsquo;t include information on your investment accounts, debit or prepaid cards, bankruptcies that are more than a decade old, debts sent to collections that are more than seven years old, or personal information like gender, race and religion.</p>
<p>It also won&rsquo;t include your credit score, the number that represents a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports -- though you may find this on your bank, credit card or loan statement. Higher scores indicate responsible credit behavior in the past, which can result in more favorable terms and interest rates from lenders.&nbsp;</p>
<p>Credit scores generally range from 300 to 850. According to one major credit bureau, credit scores 670 to 739 are considered good, 740 to 799 are considered very good, and 800 and up are considered excellent. In addition to your credit score, lenders may also consider any prior history you may have had with them as part of the credit decisioning process.</p>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/how-credit-works_body-1_1359420138.jpg" alt="A man sits on his couch and reviews a bill"></p>
<h2>Why a credit report matters</h2>
<p>A number of businesses may request permission to view your credit report, and before extending you a loan or line of credit, a potential lender will want to assess your creditworthiness. Combined with the other details of your credit application, the report determines whether the loan or line of credit is approved and what the terms are. Existing creditors may also want to review your credit history on a regular basis or whenever you're looking to make a change <ins cite="mailto:Goldberg,%20Betsy%20[CLIENT-MCO]" datetime="2024-06-30T23:39">-- </ins><del cite="mailto:Goldberg,%20Betsy%20[CLIENT-MCO]" datetime="2024-06-30T23:39">(</del>say, renegotiating loan terms (if you&rsquo;ve gotten a raise at work, perhaps) or increasing your credit card spending limits<del cite="mailto:Goldberg,%20Betsy%20[CLIENT-MCO]" datetime="2024-06-30T23:39">)</del>.</p>
<h2>Why a credit score matters</h2>
<p>When you conduct business with people or companies, they have an interest in your financial health, too, and may require credit information. Here are a few examples:</p>
<ul>
<li><strong>Utility companies</strong> offer you a form of credit, since they provide a service and trust you'll pay every month, so they may want to see how well you've kept up with your utility payments in the past.</li>
<li><strong>An insurance company&nbsp;</strong>can, in most U.S. states, use a version of your credit score in calculating the premium you'll pay for auto, home or renter's insurance.</li>
<li><strong>A landlord</strong> may also require that you meet specific credit criteria to rent a home or apartment.</li>
<li><strong>A potential employer</strong> may run a check to project your ability to handle customer money or even assess your potential to defraud the company if faced with financial trouble.</li>
</ul>
<p>If you're seeking financing for a big purchase, such as a house, car, motorcycle, home renovation or furniture, you should anticipate a credit check as well. People with a credit score of 800 or higher are typically offered easy loan approval, some of the best interest rates, higher card limits, access to exclusive perks or rewards and the most options for structuring a loan.</p>
<h2>Top tips for building credit&nbsp;</h2>
<p>Credit advice can vary depending on where you are on your financial journey. For instance, if you've never used credit before, you might wonder how you can apply for a credit card when you don't have credit history for a lender to review. Here are three main options:</p>
<ul>
<li><strong>Apply for a traditional credit card</strong>. A bank with which you already do business may be able to offer an unsecured credit card, which doesn&rsquo;t require a security deposit.</li>
<li><strong>Consider a secured credit card</strong>. With no credit history, it's possible you'll be turned down for a traditional, unsecured credit card. A secured credit card is often used as a starter card to help build or rebuild credit history. It requires you to make a cash deposit as collateral before opening an account. Your best bet is to go with a credit card issuer that reports to credit bureaus so that, with timely payments, you'll have the opportunity to build a stronger credit history.</li>
<li><strong>Become an authorized card user</strong>. If your parent, spouse, or other person you trust is willing, they could add you to their credit card account. If their card issuer reports on authorized users to the credit bureaus, you may be able to start building a financial history for yourself. But keep in mind: Some credit scoring models don't give authorized users' activity as much weight as that of primary cardholders.</li>
</ul>
<p>Already a credit user? It pays to assess your existing credit cards regularly. Ask yourself: Does your current credit score qualify you for better terms or even more exclusive cards? Have your spending habits or life circumstances changed since you first got your cards? Are there new cards on the market that are a better fit for you? Your answers might prompt you to make some strategic changes.</p>
<p>Keep in mind that, regardless of whether you&rsquo;re already a credit user or just starting out, it&rsquo;s important to always read the fine print before you get a new card or open a line of credit. You&rsquo;ll want to understand your credit limit, the annual percentage rate (APR), annual fee amounts, maintenance fees, surcharges, grace periods and more.</p>
<p>Once you have some credit available to you, it&rsquo;s up to you to build and maintain a clean history of borrowing and repayment. In general, the value of your credit score will depend upon these factors:</p>
<ul>
<li>Timeliness of your bill payments</li>
<li>Amount of credit you use</li>
<li>Amount of credit available to you</li>
<li>Length of time you&rsquo;ve been using credit</li>
<li>Types of credit and loans you utilize</li>
<li>Frequency with which you request additional credit</li>
</ul>
<p>Additionally, you&rsquo;ll have better success in building your credit if you follow a few guidelines:</p>
<ul>
<li><strong>Do</strong> pay your bills on time <i>every</i> time. Late payments on your mortgage, student loans, credit cards, utilities and other expenses can all adversely affect your credit report.</li>
<li><strong>Do</strong> limit the amount you charge on your cards relative to their credit limits. This percentage is known as your credit utilization ratio. Very high utilization may negatively impact credit health.&nbsp;</li>
<li><strong>Do</strong> keep your older credit cards active. They can add to the length of your credit history and may contribute valuable points to your credit score.</li>
<li><strong>Don&rsquo;t</strong> use credit to fill a gap<strong>. </strong>It&rsquo;s easy to dig yourself into debt by splurging on lifestyle perks you can&rsquo;t afford.</li>
<li><strong>Don&rsquo;t</strong> believe the myth that carrying a credit card balance builds your credit. If you can pay off your cards every month, do it. You&rsquo;ll avoid costly interest payments.&nbsp;</li>
</ul>
<h2>Smart ways to monitor your credit</h2>
<p>Regularly tracking your progress is a good way to see how your efforts are helping your credit score and to identify any factors that may be slowing you down.</p>
<p>Start by reviewing your credit report. You&rsquo;re legally entitled to receive a free credit report from each of the three major credit bureaus every year. Pull them all at once or separately in three stages over the course of the year.</p>
<p>Read the report thoroughly to confirm that all the information provided is current. Is your address correct? Is the data reported for each of your accounts accurate? Is there activity or an account that&rsquo;s unfamiliar to you?</p>
<p>Your credit history is an invaluable tool in helping you catch small problems before they grow into bigger ones. For instance, you may find that a bill you thought you paid is listed as past due or that a loan you co-signed isn&rsquo;t being paid off on schedule.</p>
<p>If you find incomplete or inaccurate information, immediately contact the credit agency from which you received the report. Faulty information can mar your financial history and lower your credit score.</p>
<p>At the same time, credit report errors can also indicate identity theft. If you suspect you&rsquo;re a victim, place a fraud alert on your credit report to prevent someone from opening new lines of credit in your name. If your credit card has been misused, you can contact your card issuer to cancel the card and initiate a dispute and file a police report with your local precinct. You might also consider signing up for a credit monitoring service.</p>
<p>Because your credit history report doesn&rsquo;t include your numeric credit score<ins cite="mailto:Goldberg,%20Betsy%20[CLIENT-MCO]" datetime="2024-07-02T16:22">,</ins> <del cite="mailto:Goldberg,%20Betsy%20[CLIENT-MCO]" datetime="2024-07-02T16:22">so </del>you&rsquo;ll want to review that as well. Pay attention to the &ldquo;risk factors&rdquo; or &ldquo;potentially negative items&rdquo; that are included with your score. These elements indicate what&rsquo;s keeping your score from being even higher, such as high balances or frequent late payments, and the section may also offer insight into how you can improve your score. Putting all of this information together helps make it easier to not only build (or rebuild) your credit but also helps<ins cite="mailto:Browne,%20Patricia%20[LEGL]" datetime="2024-07-17T19:05"> </ins>set yourself up to reap the benefits of a healthy score.</p>
<h2><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/how-credit-works_header_1132926273_0.jpg" alt="A woman enters her credit card information on a laptop"></h2>
<p><i>&mdash; With additional reporting from Life and Money by Citi editors.</i></p>
<p>&nbsp;</p>

Most people know what credit is — at its core, it's borrowed money — but understanding and managing your credit report can be tricky. It helps to break down the concept. 

How Does Your Credit Score Work? Here's a Quick Guide.

<p>A budget can give you a clear path to live within your means and reach your money goals &mdash; and while it's a straightforward concept, there are some strategic steps you can take to set one up (and keep at it.)</p>
<p>Many people think of budgeting as setting limits on your spending, but it's more helpful to think of a budget as a map with clear directions detailing how you can reach your financial destination. "Budgeting gives you the freedom to say 'yes' to things that matter and 'no' to things that don't help you reach your goals," says Whitney Hansen, a money coach based in Boise, ID. "Most people view budgets as restrictive, but they are actually empowering."</p>
<p>Learning to live within a budget can require a little shift in thinking because "by saying yes to something you are saying no to something else," she acknowledges. But instead of focusing on all the things you can't buy, it's better to focus on what you are saying yes to, Hansen suggests." By getting your finances in order, you are saying yes to financial security, peace of mind and things that are directly in line with your values," she says. "Sometimes we just have to remind ourselves of that."</p>
<h2>Map out the numbers</h2>
<p>The first step in creating a realistic budget is having a clear picture of your income and how you spend it. A spreadsheet (digital or analog) is a handy tool for accomplishing this. First, add up your monthly take-home income from all your sources &mdash; regular salary, freelance, side hustle or some combination &mdash; and calculate your monthly average.</p>
<p>Once you know what income you have to draw from, you can start to track your spending. Use a pen and paper (get creative with a&nbsp;<a href="file:///Z:/lifeandmoney.citi.com/money/productivity/bullet-journal-financial-planning.html" target="_blank" rel="noopener" data-link-source="tiny">bullet journal</a>) or a site or an app you trust to sort your spending into &ldquo;buckets&rdquo; such as mortgage or rent, utilities, car payment, internet, insurance, food, gas, entertainment and so on. Breaking down your spending into categories can help you figure out where you may be able to cut back.</p>
<p>To identify spending trends, you may want to try this exercise, Hansen suggests: Print the last 30 days of transactions from all your accounts. Write down three categories in which you either overspend or aren&rsquo;t sure how much you spend, such as &ldquo;eating out&rdquo; or &ldquo;online subscriptions&rdquo;. Choose a highlighter in a different color for each of these three categories and then go through every transaction highlighting those that apply and adding up the totals in each group.</p>
<p>&ldquo;This is incredibly eye-opening,&rdquo; Hansen says, because it allows you to see if there is a service you can cancel, for example, or any charges you&rsquo;ve forgotten that you have been paying. If you&rsquo;re struggling to figure out where you can cut spending, says Chicago-based money coach Tim Jordan, try asking yourself questions such as &ldquo;How much time will I spend on this?&rdquo; and &ldquo;How much fun do I have doing this?&rdquo; &ldquo;If the answer is &lsquo;meh,&rsquo; it&rsquo;s probably fine to stop spending money on it,&rdquo; Jordan says.</p>
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<p>Budgeting gives you the freedom to say "yes" to things that matter and "no" to things that don&rsquo;t.</p>
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<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/web_GettyImages-913245664.jpg" alt="young girl dividing coins into 3 different jars. From left to right, one jar is labeled " /></p>
<h2>Define your goals</h2>
<p>Once you've determined what you truly can spend on, it's a good time to consider both your short-term and long-term goals. Short-term goals &mdash; buying a new car or paying off credit card debt &mdash; might be something you hope to achieve within the next year or so. Long-term goals stretch further into the future: saving for a home, college tuition or a retirement fund, for instance. It helps to do some research to estimate how much you'll need for each of these goals and to plot out a timeline if that applies.</p>
<p>Here's one example: After doing their homework on a long-term goal of buying a home so they could settle down and stop spending money on rent, New Jersey mother of two Alyssa Wolfe and her husband learned that if they saved enough to put a full 20% down payment on a house, they could get a more favorable mortgage rate. It took them five years, but they achieved their goal of saving for this payment by taking only family-related vacations, eating out less, cutting cable service and selling items they no longer needed. To stay motivated while in savings mode, Alyssa's husband had a side hustle of buying designer suits at thrift shops and re-selling them online. Those profits even helped them create a "fun money" fund for date nights and purchases beyond their everyday budget.</p>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/create-a-budget_body-2_1340636182.jpg" alt="A couple creates a budget on their laptop" /></p>
<h2>Stay open to adjustments</h2>
<p>When you have a budget, you won't want to just set it and forget it; it's helpful to check in regularly to see if you need to recalibrate. That might mean monitoring your spending once a month and making small updates as needed. If you notice the cost of something (like a streaming subscription) changes, for example, you can ask yourself if it's something you can do without or, if it's still worth having, if there's somewhere else you can cut back. You might also want to do a more significant evaluation every year to address any bigger changes.</p>
<p>Sticking to a budget can help you better understand the tradeoffs you might need to make to meet a goal, and it can also help you clarify how much that goal really means to you. And while creating one does take some work, the upside makes it worthwhile. A budget can help you establish a mindset and good habits that put you in charge of your money and on the path to smarter, more values-driven spending.</p>
<p><em>&mdash; With additional reporting from Life and Money by Citi editors.</em></p>