This step-by-step guide will show you how to create a budget, manage your personal finances, and save more money for investments. 

Personal finance can be stressful for many people, but there are some simple tips for saving money that will put your mind at ease. With that in mind, here are some suggestions you can use to tackle your big or small savings goals for the New Year. 

1. Reduce debt 

First things first. Whether its credit card debt, a personal loan or something else, the best way to start saving is to pay down the debt you have. Getting rid of your debt eliminates interest payments on the money you borrowed, and after you pay it off, you’ll have more money available to save and invest. 

2. Track your essential expenses 

Everyone has essential expenses that need to be paid every week, month or year. Usually these are your rent or mortgage, insurance, utility or phone bills, transportation costs and grocery bills. Calculate how much you need for necessities and go from that amount. A good money management tip is that you should spend 30 to 35% on rent and 15% on other essential expenses. If it’s less than that, great! 

This will hopefully leave you with about 50% of your income to spend. Most of us indulge in a few distractions, such as a social life, hobbies, favorite subscriptions, etc., but hopefully that leaves you with about 25% for discretionary spending after that. If you go on a spending spree every time payday approaches, it can be a good idea to track how much you spend on certain things. This can be as simple as setting yourself a limit on how much you spend on clothes each month. You might even have a few extra dollars to invest in the companies you regularly store at! 

3. Pay yourself first 

Once you’ve determined how much is left over after expenses, it’s a good idea to transfer some of your excess income directly into an investment account. Most brokerage apps allow weekly or monthly direct deposits, which means you’ll transfer the money out of your account immediately and be less tempted to treat yourself to something else. It depends on each individual how much they want to invest, but remember that your investments should reflect a long-term perspective. It’s not about saving or investing every penny you earn, but about developing solid habits that you can stick to over time. 

4. Avoid an unfamiliar lifestyle 

So you’ve set a plan that you can stick to. The last point to address is lifestyle creep. This is especially important for younger people who are moving into new roles as their career progresses and their income increases. This means that your overall income goes up, but so does your spending; you might start spending a little more money now that you have more disposable income. There’s nothing wrong with that, but if you find yourself in a situation where you’re earning more, make sure you’re setting aside and investing a little more money for your future.