How to Budget and Save Money in 5 Easy Steps

Learn to manage your money, even if you don't have much extra cash

••• Responsible saving pays off. shapecharge

Budgeting and saving money doesn't come naturally to many people, for obvious reasons: it's easy and tempting to spend money on non-essentials, even if you've committed to living on a budget.

So how can you get on track with a realistic budget and save money?

It may not be as difficult as you think. These five simple steps can help you reorganize your finances, prioritize your spending, deal with any debt you may have and trim your taxes so you can budget appropriately and increase your savings. These strategies, taken together, have the very real potential to improve your financial situation over the long term.

1. Get Your Budget on Track

You're not going to get ahead financially until you develop a reasonable budget — one that allows for both some indulgences and for emergencies — and then stick to it consistently.

Budgeting your money is the cornerstone of a sound financial plan. You might scoff at the idea of creating a budget -- after all, you pretty much know what you spend every month, especially on big-ticket items like rent/mortgage or car payment.

But, seeing the numbers in black and white can offer valuable perspective on where your money is going and where it could be better put to use. Creating a budget — and then following it — can help you spot areas where you're spending more than you realize. Here you will find tips on how to create a budget and track expenses along with other money management techniques.

2. Learn to Reduce Spending

Developing your budget will help you spot areas where you're spending more than you realized. But the next step is more difficult: cutting your spending on unnecessary items. This will require some soul-searching on items both large and small.

For example, do you really need a $5 coffee every morning? (Some will say yes, while for others the answer is no.) Could you make do with a smaller, older car? Instead of an expensive vacation this summer, could you try a "stay-cation," where you stay home (much cheaper) and relax there?

All these choices are very personal and many factors come into play, so there's no right answer for most of them. But laying them out will help you prioritize your spending, and that will help you spot places where you can save money.

3. Deal with Your Debt

Few people get far in adulthood without accumulating some form of debt; credit cards, student loans, car loans, and mortgage payments are common. In fact, debt can be a good thing (who has the money to buy a house outright?), but the key is to use them wisely.

Credit cards and other forms of debt can be an essential part of your financial toolbox, but you must exercise care when using these tools. Understanding the difference between good debt and bad debt will go a long way in making sure you create and maintain a good credit history.

At the same time, it's helpful to look for ways to make your debt less expensive while you're paying it off. Transferring your credit card balances to a card with a 0 percent APR, for example, or refinancing your student loans, could reduce what you pay in interest charges and speed up your debt payoff plans.

4. How to Save Money

To build wealth, you have to start somewhere. Therefore, the ability to save money is essential.

In order to save money, you need to spend less than you earn. This may seem obvious, but so often, it's easier said than done. Fortunately, there are several devices you can use when beginning to save money, even when your budget is tight.

The most important of these is automatic savings. Open a savings account, and set up your checking account so that you automatically transfer a set amount each month into your savings account. You can apply this principle to saving for emergencies as well as saving for retirement.

You don't have to transfer much money — start with whatever your budget can afford. But making this automatic (and then resisting the urge to spend the money impulsively) will get you on the road to long-term savings.

5. Be Sure to Trim Your Taxes

Nobody likes paying taxes, but they are an important aspect of any financial plan. Even if you don't make much money, you might be surprised to learn how certain tax strategies and decisions can impact your finances.

Learning how to minimize the impact that taxes have on your finances can ensure that more money is going into your pocket and being put to use towards your financial goals.

That includes claiming all the deductions you're eligible for, as well as any tax credits you qualify for. That also means maximizing contributions to tax-advantaged accounts, such as an employer's 401(k) plan, an IRA or a Health Savings Account (HSA), as often as possible.