When it comes to financial health, the key is to have a proper plan in place before problems begin to occur. It’s much easier to maintain a positive balance in your bank account by being proactive rather than trying to make up for a loss after you’ve messed up.

Of course, it’s easy to talk about the importance of a budget. Actually creating and implementing a strict set of guidelines is usually a whole different story.

For those of us average folks who often struggle with self-control when it comes to things like personal finance, here’s a disciplinary approach to budgeting. Follow these steps to develop strong spending and saving habits:

Track Your Expenses

Before you can set a budget in place, you need to know exactly what your income is and what you’re spending that money on every month. Over the course of a week or two, write down every single penny you spend and what you spend it on.

The process can be time consuming in the beginning, but you will really benefit from the exercise. It’s much like tracking what you eat before beginning a diet — you must identify your strengths and weaknesses before establishing a plan of action.

Identify and Eliminate Unnecessary Expenditures

After you’ve listed all of your expenses, prioritize them from most to least important. Ideally, things like rent and food will be at the top and entertainment will fall near the bottom.

Next, look for patterns. Are you spending a small fortune on daily lattes but consistently carrying a credit card balance? It’s probably time to re-evaluate your habit. You don’t have to give up the delicious drinks completely, just cut back in order to allocate a larger portion of your income to more important bills.

Divide and Conquer

Now that you have a better understanding of where your money needs to go every month, write down how you divide your income among your expenditures. After targeting all of your fixed spending like rent, utilities, insurance premiums, etc., keep what’s left over for variables like dining out, going to the movies and adding to your savings account (that’s right, savings account!).

If the numbers don’t work out perfectly the first month, that’s okay. You can’t predict the future. The great thing about a budget is that it can change. Make adjustments each month until you find a system that works well.

Don’t Forget the Emergency Fund

In addition to a solid budget, you should have a buffer in place in case an unexpected financial emergency comes up, and one will at some point. If you budget every dollar into a spending category without leaving some wiggle room for the unknown, you will end up in the red sooner or later. Plus, everyone should get in the habit of contributing to a savings account anyway.

The most important thing to remember when devising a budget is to keep it realistic. A budget should be a helpful tool, not a form of punishment, so be sure to allow for fun in addition to monthly bills. As long as you create a reasonable plan with both structure and flexibility, you shouldn’t have much trouble sticking to it.

Photo Credit: Brad Montgomery

Danielle Nagami

Danielle Nagami

Go Banking Rates provides personal finance articles and the latest local and national bank rates for consumers. Visit us online at GoBankingRates.com.