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5 Simple Steps to Fall Back Into Budgeting and Get Your Financial Life on Track

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No matter how old you are, when the summer sun fades and autumn is in the air, it's back to school time.

So welcome back, class - we're going to kick off today's lesson on how to make and keep a budget with a handy rule of thumb created by Harvard bankruptcy expert, author and US Senator from Massachusetts, Elizabeth Warren.

Warren co-authored a book with her daughter, Amelia Warren Tyagi, called "All Your Worth: The Ultimate Lifetime Money Plan."

In it, she explains the rule she coined - the "50/30/20 rule" - for spending and saving:

Take your after-tax income and divide it so you spend 50 percent on the essentials you need (i.e. rent, car payments, groceries, insurance, etc.); 30 percent on the extras you want (i.e. your daily Frappuccino habit, a vacation, movies/dining out, etc.) and 20 percent on savings (i.e. savings account, an IRA, buying stocks, debt repayment).

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With all due respect to Professor Warren, while the rule sounds simple, figuring out each part can be hard. So if you're like us, you might want a Cliff Notes version of how to apply the 50/30/20 rule...

… So read on!

1) Know exactly what you have to spend

"After-tax income" isn't too hard to figure out if you get a steady paycheck, as all deductions, including state tax, local tax, income tax, Medicare, and Social Security are right there on your pay stub. What you get paid is the net amount you make. (And of course if you get paid biweekly, you'll multiply that number by two to get your monthly nut.)

It's a little trickier if you work for yourself or work odd jobs. Either way, you probably (hopefully!) pay estimated quarterly taxes, which is based on your gross income less expenses. Keep in mind that you also need to pay self-employment tax (which is double what you would pay in Medicare and Social Security taxes if you were employed), so factor that in as well. You can check out the IRS' Self-Employed Individuals Tax Center if you need help.

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2) Write down all your monthly expenses

Once you're in touch with what you should spend each month, it's time to look at what you do spend each month. You can do this using a budgeting app like Mint, Wally or PocketGuard, an Excel spreadsheet or just plain old pen and paper. This allows you to see in clear (and possibly painful) relief how your income is currently spent… and begin to use this knowledge as a roadmap.

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Step 3: Trim the fat on necessities to keep can't-live-without wants

Once you have all your expenses neatly laid out, it should become pretty clear what you must pay for each month - and what are actually luxuries.

But of course not all extras are created equal, and one person's luxury, like say, a fast, consistent Internet connection or the latest smartphone, is another person's essential.

And the cost of your needs aren't always set in stone, either.

Do some legwork to trim cost on your necessities where you can, for example, ditching premium channels but keeping basic cable, or raising a deductible on an insurance premium. There are also websites like Wirefly that can help you easily comparison shop on essentials like cell phone service, Internet service and auto and health insurance.

While dining out may seem a must to you, you can save significant dough each month by at least cutting back on going to restaurants. According to Debt.org, the average meal eaten out is $12.75, and the average American eats out 4.2 each week. You can do the math when it comes to your switching up your own dining habits to save money by eating at home.

Finally, consider changing some of your wasteful ways to save on utility bills. Simple efforts like turning off heat/air and lights when you go out, swapping out regular light bulbs for halogen or LED bulbs and unplugging electronic devices when they're off to save "vampire load" translates into real savings.

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Step 4: Get physical

The envelope system, according to consumer savings expert Jill Caponera, can give you a tangible way to stick on a budget. Once your budget is set, all you have to do put a specific amount of money in individual envelopes to cover different categories of your budget. For example, if you've budgeted $400 a month for groceries, take that amount out of your bank account at the beginning of the month (or take out half of the amount, and the other half next paycheck), and put the cash in an envelope labeled "groceries."

To keep on track with Warren's 50/30/20 rule, you can color code your envelopes to fit into the three categories of needs/wants/savings.

Using the envelope system can help you to keep your spending in check and help prevent you from dipping into extra money that could be saved or used for other necessities.

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Step 5: Find ways to add to your income if necessary

If you're not able to survive on what you make each month after taking all the steps necessary, or if you have a specific "want" you're saving up for, you may want to add to your income. In our connected digital economy, side jobs are both easier to find and more doable than ever before. From renting out an extra room on AirbnB, to driving Uber or Lyft night or weekends, or participating in paid focus groups, today's app-driven gig economy can help you expand your financial options.

Step 6: Get a roommate (if you don't have one)

Sometimes the quickest, easiest and most painless solution to a tight monthly budget is to find someone to share expenses. While this may be a last resort for some, it just might be the best protection for your brand new fall budget. (And it can make football season more fun, too.)

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Did you think there was going to be a quiz at the end of this post? There's not - just bonus points if you not just start your budget with the 50/30/20 rule, but actually stick to it.

Happy back to budget!

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