[music playing] PHILIP OLSON: Do you ever feel stressed about money? Unless you're a prince or a preschooler, you probably said yes. For a lot of people, it always feels like there's not quite enough to go around. You're constantly having to make tough decisions about what you can forego. And it never feels like you're really in control of your finances. Well, when you need a bit of inspiration, look no further than the front of a $1 bill. I'm talking about this guy, George Washington. Besides being the first president of the United States, General George Washington was the commander of the ragtag Continental Army during the Revolutionary War. He must have felt like he never had enough soldiers to go around. But by making a plan, he was able to lead that army to victory over the greatest fighting force in the world. You can take a cue from George by becoming commander in chief of your finances. Each one of these is a soldier in your army. And your battle plan is a budget. I know. The word budget makes most people want to go AWOL. In fact, according to a 2016 Gallup poll, only 32% of couples keep a written budget of any kind. But if you were a soldier, would you want to follow a general who was making it up as he went along? A lot of people tend to think of budgeting as prediction, estimating what you'll make in future months and how you'll want to spend it. But the most effective budgets work exclusively with present dollars. After all, you can't give orders to soldiers that don't exist. So the size of your army is only how much money you currently have in your bank accounts. And as general, your role is to give every last one of those soldiers a job to do. So if you have a total of $10,000 across all of your accounts, you need to decide how much of that you're going to spend this month and how much you're going to set aside for savings. Before we can decide how much we want to spend, we need to know how much we're spending now. Print out your last three months of bank statements and put each expense into one of five categories. Essentials, these are the things you can't do without-- rent, utilities, groceries, gas, car payments, health insurance, anything you need to live or do your job effectively. Security, these are expenses that increase your financial stability, like building emergency funds or paying off debts. Don't double count credit cards in this category, though. If you use a card to buy groceries, that expense should go in essentials. Goals, this is money you set aside to achieve big life goals, like saving up to buy a house, starting your own business, or taking a special vacation. Lifestyle, these are expenses that help you navigate your social world-- personal grooming and apparel, gifts for friends and family, gym memberships. Even pet needs can go in here. Discretionary, this category is all about treating yourself-- going out to dinner, renting a movie, buying a video game, or getting a massage. Everyone has their own priorities. But think of this as a good battle plan template, with the most urgent needs at the top and the more flexible ones towards the bottom. Now that you know how much you generally spend on these categories, you can start assigning your soldiers to next month's duties. JULIA LORENZ-OLSON: Unless you're living paycheck to paycheck, you probably have some money leftover. But don't let those soldiers just sit around. Decide what you're saving them for. Is it an emergency fund or a Hawaiian vacation? Savings that have explicit purposes are a lot harder to steal from. PHILIP OLSON: Congratulations, you've made your first month's budget. Now, how do you make it stick? Number one, write it down. You can use a spreadsheet, an app, or good old pencil and paper. But no general ever won a war by keeping all their strategy up here. Number two, update it. Conditions on the ground will change. So re-strategize at the beginning of every month. And you'll have new soldiers to deploy in next month's battles. Number three, use advanced technology. Thanks to the dozens of budgeting apps you can download for your phone, no one has to keep a checkbook long-hand anymore. This can be especially helpful for discretionary spending. Now, you can know right away whether you can afford that Weird Al album on vinyl. So how do you know you're budgeting correctly? Well, the most obvious answer is that you are less stressed. Imagine enjoying a dinner out without worrying about whether or not you can afford it. Imagine not holding your breath every time you check your account balance. You'd be amazed how much you can improve your mood just by introducing more clarity and control into your finances. Like a lot of good financial habits, the point of budgeting isn't to have more money. It's to be happier with the money you have. BOTH: And that's our two cents. Do you budget? There are lots of ways of going about it. What budgeting strategies have worked for you? Share them in the comments below. [music playing]