Now, you've taken the first steps—figured out where you want to go (your goals) and laid out your current budget. To reach your goals, you need to make a Future Budget that has room for paying down debt and saving for the future. This is the budget you will stick to from now on.

There are different routes to take to these goals, but the roads are related—you'll need good credit and responsible debt habits, as well as savings, to make those major purchases. And you'll likely need to cut your spending to have money for savings to overemergencies and meet your financial goals.

Making Ends Meet—Your Future Budget

Step One: Go through and circle things that you could cut back on or live without—we put some of the categories in italics to show things that you may be able to cut. Remember your financial goals! Are these goals more important than the money you spent on new clothes or going out this month?

Step Two: Next to each category, put IDEAS of how you can reduce the expense and TARGETS for what you want to spend every month going forward. For example, your gas bill may be $150 a month. You might have a target of $125 per month. You may use the "idea" of putting a note to yourself on your door that reminds you to turn down your heat when you leave the house. Read some of the insider tips in this Guide about how other people have been able to save money and spend less.

Keep Track of Your Spending

Whether or not you have money leftover, the best way to stay on budget is to use a spending diary. Every time you spend money or pay a bill, write down the amount and the category you spent the money in. Then, at the end of the month, add up each category to see if it is less than the amount you set as your target in your budget.

Moving Forward

You now have a record of what you've been spending every month, ideas on how to lower that, and targets for what it should be. Turn to page 31 to start creating your Future Budget. Make copies of page 31 and fill out the "Target $" column from your Current budget in the "Target $" column for the first month. Then at the end of the month, fill in your actual spending for each category using the information in your weekly spending diaries for that month.

• Budgeting doesn't just happen once. You can change your targets over time, as long as you are continuing to work toward your goals.
• Every month, compare the actual amounts you spent with your Target $ and make adjustments where you can. Look at each category to figure out whether you can save on that category next month.

The next sections provide more information on spending, saving and managing your debt. But no matter how much cash you have, if your credit score is low, you may still have problems with your finances.