78 percent of American workers are living paycheck to paycheck. Consumer credit in the United State has hit $13.2 trillion – an all-time high.

What conclusions can you draw from these numbers? You don’t have to be a data analyst to tell that the harsh economy is taking its toll on most Americans.

The good news is you have the power to make the most of your income and achieve financial freedom. All you need is to be a savvy budgeter.

However, budgeting for success is easier said than done. Most people create budgets and go off script a few days later.

To help you overcome this, we’re sharing what you can learn from the habits of savvy budgeters. Keep reading!

Know Your Income

Yes, some people don’t know their income!

Of course, those who are incredibly rich have the luxury of spending their money without knowing the exact amount they’re pulling in. But if you’re barely getting by, it’s vital to have a good handle on your income.

And when we speak of income, we don’t mean your gross income. We mean what’s left after taxes and other deductions beyond your control.

Knowing your net income is the first step towards to budgeting for success. How else can you create an effective budget if you don’t know how much money you have to spend?

Know Your Expenses

All savvy budgeters have their expenses figured to the dot. They know exactly where their money is going. Do you?

If you’re like most people, you certainly know your major expenses such as mortgage payments or rent, car loan payment, insurance payments, and energy bills. But when it comes to the little purchases, such as the takeaway lattes and in-app purchases, you have no clue. Yet, it’s these small expenses that add up and make a major dent on your income.

To be a good budgeter, you must have a clear picture of your expenses, big and small. A good way to stay on top of your monthly expenses is to record everything payment and purchase. At the end of the month, add up the expenses.

Set Expenditure Goals

Ideally, everyone should have income and expenditure goals. However, the former is harder to achieve as it involves starting a side business, having multiple jobs, or getting a salary increase in your current job.

On the other hand, expenditure goals are easier to set and achieve, which is why most savvy budgeters choose to focus on them.

Now that you have a good handle on your expenses, you’re in a position to know whether you’re stretching your income. As a general rule of thumb, your expenses shouldn’t exceed 30 percent of your net income. This means if your net income is $3,000 a month, your expenses shouldn’t exceed $900.

Unfortunately, this rule of thumb rarely holds for most people. In fact, it’s not uncommon to find people who have no money left after paying for expenses. This is what leads to a paycheck to paycheck kind of life.

If your expenditure is higher than it should be, setting expenditure goals is an effective way to bring it down. This involves determining the amount of money you need to cut off your total monthly expenditure, then identify the areas where you need to cut back on.

A Savvy Budgeter Has a Savings Plan

Did you know over 60 percent of Americans don’t have enough money saved up to take care of a $1000 emergency? If you’re among these people, you need to start budgeting.

Look, a budget will enable you to trim down your expenses. Consequently, you’ll have more disposable income, some of which you can put away into a rainy day fund.

That said, it can be difficult to start saving consistently when you’re not a habitual saver. Don’t go hard on yourself. Making drastic decisions such as saving 20 percent of your disposable income is a sure way to fall off the plan.

Start small, then increase the amount you save gradually.

Draw a Debt Management Plan

“How I paid off my student loans in 5 years.”

“How to wipe off your credit card debt fast.”

You’ve probably come across such articles on your social media feeds. Eager to know how to climb out of your debt, you probably clicked on them. Did you get any practical tip?

Well, we’re not saying it’s impossible to pay off your debt quickly, but for the vast majority of people, debt repayment is a long-term process — unless you hit a jackpot or drastically change your lifestyle.

A smart budgeter embraces the fact that getting out of debt takes time and crafts a budget that allows for long-term debt management. However, it’s crucial to prioritize paying off high-interest loans. These, left to run for several years, will cost you an arm and a leg.

Some lending platforms, such as moneybanker, can help you find the best consolidation loan (or another loan).

Make Use of Budgeting Tools

A decade or so ago before apps went mainstream, budgeting was a pen and paper kind of task. Those who were tech-savvy had to settle for Excel spreadsheets.

These days, though, there are several mobile apps that can track your finances and do the budgeting for you. Savvy budgeters make use of these apps. You should, too.

Master the Science of Budgeting for Success

The journey to financial freedom begins with creating a smart budget, regardless of the nature of your finances. However, the challenge most people face is drawing a budget that suits their needs. With the information fleshed out above, you now know what budgeting for success takes.

Keep tabs on our blog for more tips on personal finance.