The #1 thing you can do to improve your financial situation right now

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Do you look at your social media feeds and marvel at how your friends can afford those fancy vacations to tropical destinations or that new pool they’re lounging around in their backyard?

Do you sometimes spend more money than you probably should trying to “keep up with the Joneses” buying fancy experiences and things for yourself?

If so, you’re not alone — but you also could be making some big and long-lasting mistakes when it comes to your financial future, according to one recent survey.

This is the most important thing you can do to stay on track financially

Each year, financial firm Charles Schwab publishes its Modern Wealth Survey, which is basically an attempt at taking taking the temperature of Americans as it relates to their financial health.

According to the 2019 survey:

  • 60% of us wonder how friends can afford expensive experiences posted on social media
  • 57% of us pay more attention to how our friends spend vs save
  • 35% of us spend more than we can afford to participate in experiences with friends
  • 34% of us are influenced by social media to spend money on experiences

It’s that spending more than we can afford part that is especially troubling when you consider that 59% of us are living paycheck to paycheck, according to the survey, and only 38% have built up an emergency fund.

Add to that the fact that on average we spend almost $500 a month on “non-essential items” and you can see how the math doesn’t add up when it comes to financial stability.

But the survey does offer something of a solution to the anxiety and uncertainty so many of us face when it comes to our money: Planning.

“[M]ore than 60 percent of Americans who have a written financial plan feel financially stable, while only a third of those without a plan feel that same level of comfort. Those with a plan also maintain healthier money habits when it comes to saving.”

Schwab 2019 Modern Wealth Survey

Why creating a budget could change the course of your financial future

The first — and most important — step in financial planning is to create a budget. After all, if you don’t know where the money you’re making is going every month, how are you supposed to know how much you can save?

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As money expert Clark Howard puts it, “A lot of people look at being told to do a budget as if their life is being restricted. But the whole idea of budgeting is freeing because you’re getting your life under control, creating more choices and reducing anxiety.”

Creating a monthly budget is the easiest path to identifying those “non-essential expenses” and hopefully diverting that money toward an emergency fund (if you don’t already have one) or savings for future big purchases or retirement.

Click here for our Free budget worksheet: The CLARK Method to create a monthly budget

“Get your expenses under control, free up some money and then the options start to become more clear about what you do with the money that you’ve managed not to spend,” Clark says. “Once you’re living on less than you make, there are no absolutely wrong choices.”

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