3 Simple Steps for Your 2014 Budget Calculator

In 2013, I spent $63.83 on five haircuts and gave a homeless man $1.59 on Dec. 12. I know this because I keep a budget calculator -- and you can, too. Here are three simple steps to manage your personal finances with your own budget calculator.

1. Know thy expenditures
Knowledge is power. You can't decide how much to spend if you don't know how much you're spending. From haircuts to homeless donations, keeping track of your personal finances has never been easier.

Online accounts record every electronic transaction you make, and smartphone apps keep budgeting a hand's reach away. Literally.

Intuit's (NASDAQ: INTU  ) Mint.com offers some of the best summaries around, but there are hundreds of offerings to choose from. No matter what tool you pick, the most important thing is that you actually use it. Built-in budget calculators keep you on track so you can make sure you're not blowing too much on bubble gum, Bojangles, or booze.

2. Find your "hot spots"
One of the biggest mistakes you can make in your budget calculator is to ignore comparisons. Keeping everything in context can point out "hot spots" in your expenditures, while also allowing you to breathe easier for some purchases.

Studying in New Zealand made traveling a necessary expense for me, but realizing that I spent as much on flights as I did on lodging kept me on the hunt for the best frequent flyer deals around.

On the other hand, I may grumble and groan about my phone bill, but it ended up accounting for just 1% of my expenditures last year. And when I look back and know I spent just $6.30 per day to feed myself, I can feel at ease about splurging on pine nuts for homemade pesto.

3. Don't forget income
Technology has made personal finance easier than ever, but plenty of folks forget the golden rule of budget calculators: Spend less than you make. Accounting for income puts spending in perspective and ensures you keep your bottom line in the black.

The easiest way to save more is to spend less, but there's no sense stressing if you're covering costs and tucking away a percentage for retirement.

If you're spending more than you earn, however, it's time to re-evaluate your expenditures. Debt is a necessary burden for some, but it should never be a goal and it shouldn't exist as status quo. But there's good news -- if you follow the first two steps, your personal finance is going to be easier than ever to manage.

Start 2014 on the right financial foot
If you've made it this far, you're already miles ahead the average American's money management. But long-term financial freedom is about more than budgeting -- it's about making your hard-earned bucks work for you. Investing your money is the easiest way to maximize profit-without lifting a financial finger.

In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.


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