Learning how to handle money and not get into debt can be a challenging learning experience. Unfortunately, many people don’t realize that credit cards create a trap before experiencing financial trouble.

It’s essential to learn how to be proactive before getting caught on a credit card debt treadmill, whether from overspending on everyday purchases or not having an emergency fund to pay for an emergency like a major car repair.

When creating your budget, there are many ways to enhance your savings. You can reduce costs on everyday and big-ticket items by shopping smart, knowing the best time of year for big-ticket purchases, and using lower-cost options like budget auto insurance.

Understand Budgeting (and How to Begin)

Creating and understanding a budget is the one big step to handling your debt and accumulating savings.

Creating your budget can seem like a difficult task. However, the process amounts to four essential parts: knowing where your money comes from, where your money goes, what your bills are, and when they are due.

Learning how to cut costs can save you money, from simply spreading out holiday gift purchases over the year to knowing the best time to purchase big-ticket items. Even by eating well on a budget, you can find significant savings.

Where does your money come from?

To create your budget, you need a complete picture of where your money comes from. For example, if you are self-employed, have more than one job, or receive any government benefits or child support, you will need to account for each of those sources of income.

Write down all those sources of income and the monthly timing of this money.

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Where does my money go?

The easiest way to understand where your money goes is by creating a spending tracker. By keeping track of your spending for a month or more, you will see where your money goes each month.

Log your spending by categories, like rent, utility payments, car payments, and insurance. Keeping track of small amounts throughout the weeks will help you understand how these little expenses affect your budget.

By tracking costs for buying a cup of coffee, eating out, and any entertainment expenses, you can see how they add up over time. Once you see these small purchases, you can work to reduce them and have more control over your money.

If tracking expenses for a month or two feels overwhelming, try tracking them for just a week or so. Even keeping track for a short time will help you understand your money flow.

What are all my bills, and when are they due?

You may find that you get close to the end of the month, and you’re short of funds. Unfortunately, the timing of your bills and income may not match up well. Make a bill calendar to know when each payment is due and when you need to be cautious with your spending even though you have money in your account.

Missing payments or making late payments can significantly negatively affect your credit scores. It can also mean you are paying more interest charges and late fees.

Create a Working Budget

You can create your working budget now that you know your income and expenses and know when your bills are due. Having a budget will help you see if you have enough money to cover your bills on time and how you might cut back on some expenses and add to your savings.

The Consumer Financial Protection Bureau has many resources to help you set up a budget and get control of your finances. Periodically review and update your budget as your situation changes or pay off debt.

Sticking to a Budget

It will take time to change how you spend and track your money. But getting control of your finances will offer confidence and peace of mind. In addition, you will be able to create a plan to manage and reduce your debt.

Find a system that works for you. Make a note of each purchase in a small diary or list on your phone. Put each receipt in a dedicated envelope and review these at the end of the week.

Pay attention to your spending and decide how to add income or cut spending to build your savings. Set goals for paying down debt and increasing your savings.

Save Money by Smart Shopping

To increase your savings, use shopping apps like Honey, Rakuten, or Ibotta, and sign up for store cards that give discounts. Try shopping at stores where you don’t usually shop, and make a list of your weekly grocery needs. Plan menus to cut back on impulse purchases.

Instead of buying new clothes, consider buying from thrift stores and online sites like Etsy. Thrift stores offer excellent value for the money, and you can usually try on your finds and contribute to a good cause.

Consider buying refurbished electronics or last year’s model. You can save money and still get a warranty. Consider joining a warehouse club to take advantage of bulk purchases. You can also buy discounted gift cards through these stores.

Compare auto insurance prices and take advantage of promotions and auto insurance discounts. Use price matching, which can allow you to save even after the fact by matching a competitor’s price.

Know When to Buy Big-Ticket Items

Did you realize you can take advantage of substantial savings by timing your purchases to take advantage of fluctuations in the market? For example, if you are shopping for a new TV, January is a great time to purchase it.

Many retailers target their most aggressive sales to the period between Christmas and the Super Bowl. January is also a great time to shop for home furnishings and mattresses. Retailers want to move stock from the past year out and make way for the new.

This same principle applies to home appliances as well. So don’t worry if you miss these sales; retailers often have big promotions for Presidents’ Day in February too.

The new year is also the best time to look for promotions related to fitness, dieting, and gym memberships. In addition, fitness equipment and apps are also frequently priced at a discount in January.

Invest to Make Your Money Work for You

When you have mastered budgeting and built up an emergency fund, you may want to learn about investment options to increase your assets. You can learn quite a bit about investing by reading books on personal finance. Check a local bookstore or visit your local library.

You can also speak with an investment banker or representative at your credit union. There are online resources if you are looking for mutual funds or investing in the stock market. You will find savings options with higher interest rates as your savings grow.

Continue reviewing your situation periodically and contributing to building your future.

Alexandra Arcand writes and researches for the auto insurance comparison site, 4AutoInsuranceQuote.com. She is a finance expert who enjoys sharing her knowledge of savings with others.