In today’s volatile economic climate, it’s more important than ever to develop good financial habits.

There are many reasons for this, including the fact that you want to retire someday, and it would be nice to have some money set aside for your retirement.

Also, the faster you can pay off your debts, the less money you’ll have to spend in interest.

Below I talk about 5 steps that my husband and I began incorporating into our lives last year to help us take control of our finances and to help us develop good financial habits that we will follow for the rest of lives.

Determine Your Budget

First, sit down with all of your bills and financial papers, and make a list of everything related to your money situation.

Determine your annual earnings, including supplementary income, to see for yourself exactly how much money you make in a year.

Then, look at your bills and receipts – everything from utilities to insurance of every type, even loan and credit card payments, to determine the amount you spend in a year.

Place these two totals against each other; if the amount you spend is greater than the amount you earn, it’s no wonder you may be sliding into increased debt.

You’ll never survive like this; it’s time to make some adjustments.

Cut Down On Expenses

Take a look at the expenses that you have, and number them in order of necessity.

Once you do this, you’ll see that things such as mortgage and loan payments, utility bills, and insurance payments are among the most important, followed of course by things like groceries and gas.

Related: 101 Frugal Tips to Help You Save Money

However, below that are the things that aren’t as necessary, such as entertainment, fast food and restaurants – things that, if you were to cut them from your life, wouldn’t kill you.

See just how far you can restrict spending on those areas, and determine just how much money that frees up in your budget.

Earn More Money

If you’ve cut down as much as you can, and you’re still not coming out with enough at the end of the day to feel comfortable, there’s more that you can do.

You might have to get a second job, or a different full-time job that pays more for your time than your current occupation.

It’s entirely possible for you to look for more advanced positions at the company you work for, which would be a more secure way to go about it.

Talk to your employer about getting a raise, or see if there are any exciting new positions opening up in your company that you’d like to apply for.

In addition to that, you can start selling things that you have, but don’t really need, at garage sales or thrift stores. Go through your closet or your garage and pick out stuff that you can sell.

Do whatever it takes to make more money, because a little goes a long way.

Plan a Timeframe

Let’s say that you’ve done the impossible – you’ve cut down on your expenses and found a way to earn more income, and you’ve gotten to the point where you have money left over at the end of the month.

Once this happens you need to figure out what to do with the extra money, and start setting more concrete financial goals.

You could try to completely pay off your credit card balances or loans, or put more money in your retirement account.

No matter what you do, you have to formulate a plan in order to accomplish it.

Determine a specific time frame for completing this goal. If you don’t set deadlines, you’ll never get around to it.

Once you set the end date for your particular goal, divide that time interval into chunks; try to set miniature goals and phases to meet every month, so you know that you’re making progress.

Allot your extra money toward this goal, being sure to use at least the amount required each month for your particular phase, if not more than that. Before you know it, you’ll be debt–free, or have a great nest egg for retirement.

Re–adjust Accordingly

As you create your plan keep in mind that things in your life can change quickly and something may come up that you need to spend money on.

Also, what if you overestimate the amount of money that you can allot to your particular goal, or an emergency comes up?

If something like this happens and you are not able to meet the goals that you set for yourself, it’s not the end of the world. All you have to do, and all you really can do, is change your plan.

Don’t completely give up on your ultimate goal. Instead, adjust your timeframe in which you plan to accomplish it.

Put a little less money away for it, and set more realistic financial goals. You may have experienced a setback, but it doesn’t have to completely derail your plans – as long as you can stay on target and do the best you can, getting your finances under control is well within your reach.