Are you always wondering why you exhaust your monthly salary without having anything left to save? Are you always wondering why you keep wallowing in a mire of huge debt despite earning a decent monthly income? Then it’s time to create a budget and stick to it.

Making a budget and sticking to it is the best way to take control of your finances. It helps you ensure that you don’t spend more than you should and that your money is being spent on the right things. In addition, using a budget can help you save more money, get you out of debt (if you are struggling with it), and achieve your personal financial goals quickly.

Due to the multiple benefits of having a budget, you need to know how to create one. Here are proven guidelines for creating a realistic budget that will help you achieve you financial goals.

How to Make a Budget Plan to Save Money on a Fixed Income

1. Determine your overall monthly income-: If you are earn a fixed salary, then you are certain about how much you take home each week or month. But if you are a freelancer or independent contractor whose monthly income varies, you should try to figure out how much you earn on the average. Knowing how much you earn per month is the first step towards creating a workable budget. However, you must bear in mind that your monthly income is what you are left with after you have remitted your due tax. So, don’t factor in your tax dues into a your overall income.

2. Understand how you spend money-: Your next and perhaps the most important steps towards setting up a budget is to list every bill that you pay monthly as well as your minimum payments to things like credit cards.

Think about how you spend your money each month. What are the monthly bills you have to pay? What are your extraneous expenses that are not really necessary? Looking at where your money is going can help you control your expenses better. Pick up a pen and paper. List all the things you spend your money on. Then break down your expenses into categories, such as home, auto, food, utilities, health, savings, and so on.

If you owe some debts, you should make a separate list of the total amount you owe each creditor. If necessary, you may need to call your creditors to confirm exactly how much you owe them. Calculate your total monthly payments to know how much you will set aside for them each month. Remember, this is the time to be completely honest with yourself. Never lowball your expenses nor inflate them.

3. Add in extra payments-: To the total you have calculated in the first step, add the amount you spend on gas for your vehicles, groceries, clothes, and anything else you spend money on each month, such as newspapers, cigarettes (yes, you need to add it if you smoke), and wine bottles.

To get a clear picture of these additional expenses, you may want to keep your receipts for a week or two. Don’t forget that you will need some pocket money for emergency payments. Total your extras together with your monthly payments.

4. Compare your spending to your monthly income-: After listing your monthly spending, compare your calculated total expenses with your total income. If what you get after subtracting your expenses from your earnings is a negative number, that means you are living beyond your means—and you need to reduce your spending until it equals or becomes less than your income. Spending more than you earn is the worst financial mistake you can ever make, and it can confine you in the quicksand of debt for life.

If your total expenses exceed your income, you need to check your list of expenses to find areas you can cut down on. For example, you can stop buying newspapers and start reading the news online using your phone, instead. Similarly, if you are a chain smoker, you can reduce the number of sticks you take per day (aside that this will help you save money, it will also improve your health). You might be paying too much for auto insurance, in which case you need to look around for a cheaper policy.

As you note areas where you can cut costs, keep subtracting your total expenses from your income until you get some left over. If you still can’t make this happen, probably because you can find any unnecessary payment in your list, you might need to increase your income by taking another job.

5. Set your budget and financial goals-: By creating a budget, you should have some goals in mind, both short-term and long-term. Setting goals and working towards achieving them helps you stay on track with your budget. Examples of short-term goals include saving a certain percentage of your income every month. Examples of long-term goals include paying off a huge debt or being able to put down a mortgage payment on a home or car. Short-term goals are easier to reach than long-term goals, but they are usually a build-up to the long-term goals. If you are unable to achieve your short-term goals, chances are you won’t be able to achieve the long-term ones.

6. Analyze your spending for importance and necessity-: With your short-term and long-term goals in mind, go through your list of expenses once again to see if your total expenses can allow you to achieve your goals. If you cannot achieve your goals without reducing your expenses, then you need to cut down on those spending that are not absolutely essential.

If a significant amount of your money is going into things that are not necessary, you will need to cut down on those. In short, you will most likely need to make necessary changes to your spending habits in order to achieve your goals.

7. Restructure your budget-: After eliminating unnecessary spending from your budget, rewrite and review what you are left with. This will help you ensure that you have not left out anything important. Don’t forget to include unforeseen spending in your budget, such as the cost of repairing your car after you suddenly landed into a ditch or the cost of fixing your smartphone screen that smashed after the device slipped off your hand.

8. Stick with your budget-: The only way to make your budget useful is to implement it to the letter. Don’t be tempted into spending over your monthly budget, as that’s a sure recipe for failure to achieve your short- and long-term goals. Creating a budget is easy, but sticking with it is difficult. If you can successfully stick with your budget, then you will be able to achieve your financial goals.