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Do the Math: What Can You Afford?

Managing your income and finances can seem overwhelming, but it’s essential to get off to a smart start. Creating a “plan to spend” instead of spending without thinking is the key to long-term happiness and short-term calm.

To begin building your budget, list your income from all sources. Next, record your monthly and yearly expenditures, starting with your biggest items, like rent or mortgage, student loan payments, and car payments.

Be honest with yourself about the difference between needs and wants, and categorize them appropriately by listing your needs first when you budget. A great rule of thumb is the 50-20-30 rule. Put 50% toward essential needs such as rent, transportation and food, 20% to savings for retirement and emergencies, and use 30% wants such as travel and entertainment.

Check out our calculators to find out how much you can afford, if refinancing could save you money, and more.