Over half of all Americans are living paycheck to paycheck. Are you one of them? By the time you finish reading this article you will have a simple tool to help you out of this frightening statistic.

Alarming Statistics

Over half of all Americans live paycheck to paycheck.

- Project C.A.S.H.

How do you learn to handle your finances?

You spend such a great deal of time working to make money but most spend so little working on how to make that money work for you. Everyone should manage their money. The first step is Money 101: Create a Budget!

START MANAGING YOUR MONEY BY CREATING A BUDGET

1 – KNOW YOUR TRUE INCOME

Start with the basics. Identify how much money you make.

Begin by figuring out your net paycheck and multiplying the number of checks you receive per year then divide by 12 (months in a year) or taking your annual net income and dividing it by 12 (months in a year).

For example:

If you are paid weekly $1200 then your monthly income is

$1200 x 52 (weeks in a year) = $62,400 / 12 months = $5200 per month

2 – MAKE A VERY, VERY DETAIL BUDGET

What are your actual expenses? Take a look at how you are currently spending your money. By looking at your current spending habits you can identify areas where you need to modify spending. Some "necessities" are often luxuries we like to think of as necessities (morning coffee, dining out, new shoes for every new outfit, etc).

It is smart to evaluate your current spending and set goals that take into account your financial goals. Once you've set your budget, STICK TO IT and track your spending to make sure it stays within the guidelines you've established.

It is important to detail every standard monthly expenditure you have.

Be realistic on how much you actually spend. Look at how much you spent last month these items and you may be surprised.

Here is a sample list of expenses:

EXPENSE #1

Savings - 10% of income (remember PAY YOURSELF FIRST!)

Household Expenses

Mortgage or Rent

Home Owners Association

Food

Groceries

Dining Out

Coffee/Tea

Lunches (kids)

Electric

Gas

Cable

Trash

Water/Sewer

DSL or Highspeed Internet

Telephone

Home Office Supplies

Personal Expenses

Car Payment

Car Insurance

Gas

Health Insurance

Medications

Cell Phone

Club or Membership Fees/Dues

Clothes

Shoes & Accessories

Toiletries

Subscriptions

Entertainment (movies, theater, amusement parks, etc.)

Debit Payments

Credit Card Payments

Loan Payments

Student Loans

Second/Third Mortgage Payment

Boat, Motorhome, Time Share Payment(s)

Medical Bills

If you have children

Tuition/Day care

Clothes

Sports, classes or club fees

School expenses (formals, pictures, uniforms, etc.)

Babysitting

Miscellaneous Expenses

Special Savings (see #3 for more explanation)

Include any items omitted from the above list that you spend money on

+++NOTE: Now that you know how much you spend each month SPEND SMARTER. Make changes to your budget and change your spending habits to be able to save monthly.+++

3 – THINGS YOU NEED TO PLAN FOR BUT USUALLY OVERLOOK

There are items in your budget that come up irregularly but will inevitably come up. Things like new tires, vacations, Christmas, etc. If you have not created a separate savings budget to plan for these items you will soon find yourself overbudget and in a jam.

Know the "Special Savings" figure you actually NEED to save each month.

This list will include the cost of the following:

Income Tax

Car maintenance such as new tires, oil changes, brakes, etc.

Vacation(s)

Christmas Expenses, gifts, etc.

Car Registration

If you own a home:

Homeowners insurance

Property Tax

Home repairs or maintenance costs (water heater, roof leak, etc)

4 – SAVE, SAVE & SAVE MORE

Whatever method of savings works best for you, DO IT. Even if it a jar on the dresser you fill with money, a savings account, whatever. Take 10% of your earnings and pay yourself first, meaning save. This money will not only build a cushion for emergencies but will help you sleep better knowing you have a little stashed away should something come up unexpectedly.

It will also create the habit of saving and budgeting will lead to smarter spending, which in the years to come will develop into a solid future.

Even if you finish you spending and savings budget and it is more than you make it is a starting point. 40% of Americans live on 110% of their annual income! Don't be one of them. Cut back expenses or find more income. It is better to have to tackle your finances than to not even know you have a problem.

More sophisticated money management, such as investments, can be tackled later. Start with getting the basics in and working!