Creating an actionable budget is the first step in obtaining financial freedom. While your ability to save money for emergencies, one-time purchases, and your retirement will be an ongoing process, meeting these goals will largely depend on how well you budget your finances each month. The following tips can help you create a better budget, allowing you to do more with your monthly income.

Use the 50/30/20 Plan

Your first step in better money management is to create an actionable budget that you can realistically follow. This doesn’t mean you won’t have to adjust it from month to month, but you should have a basic plan in place. The 50/30/20 strategy is popular because it makes it easier to know how to divide your total monthly income. This rule requires that up to 50% is devoted to paying your required monthly expenses, including rent or mortgage, insurance, utility bills, minimum credit card payments, and similar expenses. Of your remaining income, 30% can be assigned to entertainment, dining out, and other unnecessary expenditures. The remaining 20% should be used for debt repayment and savings. If you have trouble following the 50/30/20 rule, you should take this as an indication that you may need to find an additional source of income.

Make Debt Repayment a Priority

Once you can devote 20% of your monthly income to debt repayment, you’ll be able to work more effectively towards obtaining financial freedom. A popular method of debt repayment is the snowball method, which involves paying off your smallest debts first. After you pay off each debt, you’ll have more disposable income to put towards paying off the next smallest debt. By the time you reach your larger debts, you’ll have much more cash each month to put towards paying off those debts.

Stop Overspending

There are many ways people overspend on their budgets without realizing how much they’re losing each month. You can tighten your belt by making coffee at home rather than buying a cup of gourmet coffee at your favorite cafe. Make that a rare treat rather than a daily habit. You should also eliminate unnecessary subscriptions. For example, if you stream content online, cancel your cable subscription. You can save more money by buying bulk and generic groceries. Use GoDaddy coupons to help you save on the brand-name products you do buy. It can also be beneficial to shop at a dollar store before going to your supermarket. Look for more ways to save as you go about your daily routine to help you squeeze more out of your monthly income.

Plan Ahead For Expensive Occasions

Some occasions require overspending within that month, such as Thanksgiving, Christmas, birthdays, and anniversaries. Since you know these occasions are coming up every year, it makes more sense to plan for them year-round. You should start by estimating the average you spend for each occasion and adding those amounts together. If you divide that sum by 12, you’ll have an average of the extra money you spend each year. By saving what you need across the entire 12 months, you won’t face a surprising financial emergency as a result of those added expenses.

Invest Your Savings Wisely

After you finish repaying your debts, you can start devoting 20% of your income towards saving more for your future. This money should be divided between a retirement investment account and a traditional savings account. An investment advisor can help you grow your retirement wealth without unnecessarily risking your savings. Additionally, you should look for ways to maximize your savings to earn more on an annual basis. For instance, a high yield savings account will help you earn more interest on your savings. You can also invest money in CDs, bonds, and mutual funds to grow your savings with modest risk. Choosing low-risk investing options for your savings as you take a more aggressive strategy in building wealth for retirement will help you protect your present financial status as you build the wealth you’ll need in your future.

Once you start building up a savings account, you should start devoting some of that money to building retirement wealth. If your employer offers a 401k plan, take advantage of that opportunity. You can also start an IRA or Roth IRA separately to maximize your retirement wealth. Since few people have enough by the time they reach retirement age, maximizing your savings and investments now will help you later in life.