Do you know how much money is coming in and going out of your paycheck each month? The best way to gather this information is by creating a budget. This will let you know where you spend your money. You’ll also discover where you can cut back on your expenses, which can help you save money. This article explains how to create a budget and make that budget work for your needs.

Write Down Your Goals

The first thing you need to do is write down your goals. These are goals that you have for your personal finances, which might include paying off your credit cards, becoming free from debt, and starting up a savings account. This is the first step since is helps you track your progress.

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Record Your Purchases

When you record your purchases, you need to record everything, even those little purchases, which you barely think about. While you may not think they’re a big deal, these little purchases can become an issue then you add them up. A group of little purchases can equal the same amount of money as a big purchase.

When you have too many little purchases, you will find your money disappearing faster than you can track it. So, whenever you go out, at least for the first few weeks, you should record every purchase you make and this will help you see where your money is going.

Create Spending Categories

In order to determine where your money is going, you need to do a little organizing. Some basic categories listed in budgets include utilities, food, debts, work-related expenses and fixed expenses.

You can include categories for things that are important to you. This includes things like car insurance, birthdays, life insurance, and savings. Keep one category open for fun money that can be used for special occasions and just having fun.

Hold a Meeting About Finances

If you have a spouse or other household members, you will need to hold a meeting with them to discuss the budget. Talk it over. You can come up with a plan for your budget, compromising and negotiating until you find something that works for both of you.

When you work with your spouse, you’re more likely to keep on the budget. Then you’ll both be on the same page. Each person needs to be willing to work together and give a little to get the best results.

Schedule Time to Make the Budget

Create a budget can take some patience and work. Make sure you have some free time to get the work done. This budget needs to be something you can live with long-term. Keep some wiggle room in your budget in case of an emergency.

Take the time to make a budget that allows you to live within your means. If you have to make too many sacrifices then you may find it difficult to live within your budget.

Tweak the Budget

The budget you create may not always remain the same. You are not going to be in the same financial situation next year or five years from now. That’s why you should periodically take a chance to look at a budget.

In order to see if there are things that you can change, look at what you need to meet your needs and which items can be eliminated. While you want to make changes to your budget, you don’t want to tweak your budget too often.

According to its website, EverBank is now offering a so-called 3 Year LIBOR Index CD.

The product, which is issued without a prospectus, appears from the information on EverBank’s website to be three years in duration, yet based on the 3 month London Interbank Offer Rate (LIBOR) plus 25 basis points. The product resets quarterly (on March 1, June 1, September 1 and December 1) although it is unclear what rate a deposit receives from the date of deposit until the first reset date.

It absolutely makes sense to position oneself for higher interest rates in the US, especially since they are very likely to be increased following the election of Donald Trump. In a prior article, I have indicated that depositors should protect themselves by avoiding (or selling) bonds at this point and favor savings over CDs, even short term CDs with low early withdrawal fees.

Protecting yourself from rising interest rates is easy. But, positioning yourself to benefit financially from rising interest rates is much more difficult.

The 3-month US dollar denominated LIBOR Rate has moved dramatically over the course of 2016. It began the year at 40 basis points, and recently spiked as high as 88 basis points to a 5-year high.

In 2017 and beyond, we will have a US Federal Reserve, a global economic backdrop (with extremely low rates outside the US acting to keep US short-term rates very low) and a worldwide economic environment all acting to continue to compress US short-term rates and ensure that they will only move up very, very slowly for many years.

Even if the rate were to move to 1.5% (almost twice where it is today) over the next three years, which I view as highly unlikely, the EverBank product would yield only 1.75%, which is hardly a very attractive rate of return on money that is tied up for 3 years.

See the best 3 Year CD rates here. (Hint: EverBank itself is offering a fixed rate without the risk that is comparable with the above best-case scenario.)

Rather than invest money with a 3 year time horizon and tie it to the short end of the interest rate curve, investors and depositors with that type of horizon should look for ways to benefit from a move in the 10-year US Treasury from 2.3% to 3.5% or a move in the 30-year US Treasury from 3% to 4% or 5%.

This exposure is most easily achieved by investing in major insurance companies (Berkshire Hathaway, Aflac) and money center banks (Bank of America, Citibank, JP Morgan) that have business models that leverage the interest rate spread. It is also achieved through structured notes offered through brokers like Morgan Stanley and Merrill Lynch that can generate interest rates tied directly to the 10-year US Treasury rate or the spread between the short end of the curve and the long end.

Investors and depositors will not make money by betting on a dramatic rise in the short end of the curve, as the EverBank product does. 3-Month LIBOR will remain compressed at or around current levels for the next several years and the money that you would otherwise allocate to this product should just stay in cash.

See the best savings rates here.

Note: EverBank is perhaps the most aggressive bank in the US when it comes to pushing the line between the definition of a CD, or certificate of deposit, and an investment product. The Jacksonville-based bank has in the past offered investment products tied to emerging market currencies, emerging market investment indices, precious metals and interest rates. EverBank designates these products as CDs on the basis that their principal is guaranteed by the bank, and therefore FDIC insured. In 2009, investors lost money in products designated by EverBank as CDs, although these products are now often structured so that, while the investor or depositor does not accrue any gain, they do not lose principal. These products are always issued by EverBank without a prospectus or a SEC registration; EverBank, unlike virtually any other bank in the US, believes that it is exempt from the registration requirements in the Securities and Exchange Act of 1933 as it is a bank as defined in Article 3(a)(2) of that Act.

In August 2016, EverBank reached an agreement to be acquired by TIAA-CREF. TIAA has mismanaged retirement assets for employees of universities and nonprofits for decades. If consummated, the TIAA acquisition, in all likelihood, will mark an end of EverBank’s issuing of investment products labeled as CDs without a 1933 Act prospectus.

I have written many articles on structured notes on this website over the past several years and fielded a lot of questions from readers of the site about these notes. These types of investments are not FDIC insured and ordinarily require a brokerage account with an investment bank like Morgan Stanley or Merrill Lynch to access. Hence, they are not for everyone. In fact, even for the most aggressive depositors and investors, they should only make up a small part of your portfolio. But, against the indisputable backdrop of rising yields and a steepening yield curve in 2017, it is a good time to take another look at these types of notes.

The interest rate-tied structured notes that are most prevalent are ordinarily tied to US Constant Maturity Swap Rates. The prospectus underlying these notes will always identify Reuters Screen ISDAFIX1 Page as the governing measurement, but the rates can be estimated by looking at the Constant Maturity Swap (CMS) rates at the bottom of this Federal Reserve webpage; the 2-year, 5-year, 10-year or 30-year swap is the difference between those CMS rates and the 6-month rate.

Interest rate-tied structured notes come in many different forms. For example, banks can issue notes that are tied to the 3-month CMS or LIBOR that have a cap and a floor (i.e., trade between, say, 3% and 10%). Just a few years ago, they issued notes that paid a fixed rate as high as 8% so long as the 6-month LIBOR stayed between 0 and 6%. However, since the long end is likely to rise much faster than the short end of the yield curve, investors and depositors should look predominantly at two categories in 2017: those that are based directly on the 10 year CMS swap rate and those that are based on a spread between a short swap rate (either 2-year or 5-year) and the 30-year CMS swap rate times a certain multiplier (usually 4x or 5x for the 2-year CMS-based notes, and as high as 8x or 9x on the 5-year CMS-based ones). There is always a second condition that notes will not pay interest for those days where an equity indices (usually the S&P 500 or Russell 2000) falls below a barrier level. The barrier level is ordinarily 75% of where the index is trading on the day the notes are priced. These notes ordinarily have a capped maximum interest rate that they can pay (between 9 and 12%) and often guarantee payment of that interest rate for the first year. These notes are usually very long term in duration and are sometimes callable after the first year.

In a rising interest rate environment, these notes are likely to produce strong interest as determined at each reset date. For example, those notes that are geared to the 2-30 CMS spread could easily get to their maximum capped interest rate as the spread gets to (and assuming it stays above) around 2%. An interest rate around 8% to 10% will probably be a nice interest rate to make over the next few years as rates rise, especially as those in bonds begin to lose money quickly. (Likewise, however, if we were to see an inverted yield curve, even one with much higher yields across the board, these spread notes could, in fact, yield nothing).

In addition to the interest rate risk, these interest-rate structured investments are not without other real risks. We define three main risks, although there are many more.

First, there is credit risk. These notes are tied to the debt of the issuing banks and are not FDIC insured. While Morgan Stanley, Chase or Citibank are pretty good credit risks, so too was Lehman Brothers as we entered 2008. Natixis, BNP Paribas, Societe Generale, Deutsche Bank and Credit Suisse are also big issuers, and while their notes can now be acquired at a discount, you should not be a purchaser of these notes at the moment unless you recognize and understand the credit risk that you are assuming.

Second, you have liquidity risk. These notes extend out for very long periods of time, and if you (or your estate) need to get out of them, you are going to get hosed. You can often benefit, however, from the hosing of others by buying notes through your broker on the secondary market. Under any circumstance, you should recognize that you are never likely to be liquid quickly, and even if the interest rate play that you want to make materializes and your notes are callable, you could still be holding the notes in some distant interest rate environment that you cannot really foresee at the moment.

Third, you have a risk of phantom income in the form of Original Issue Discount (OID) that your broker will be required to report on your 1099 by virtue of your ownership of these notes. OID is determined largely based on the discount that the issuer sells the notes to your broker and an amortization schedule in the prospectus, and may substantially reduce the effective income of these notes in the first few years after the notes’ original issuance. In order to fully understand the effects of OID on your taxable income, you will need to read the prospectus carefully and speak with your tax advisor.

Therefore, while interest rate-tied structured notes can be an effective way to generate yield in both a rising rate environment and a steepening yield curve, they are very risky and aren’t for everyone. Even the most aggressive investors should therefore keep a portfolio that is much more skewed towards cash accounts and very short term CDs.

Note: There has recently been a large issuance of interest-rate tied structured notes that involve a return of principal of less than 100% if a second defined barrier level is breeched on the date of maturity. For the same reasons that we strongly recommend that depositors avoid all equity-linked, commodity-linked and commodity-linked structured notes, interest rate-linked notes that do not guarantee 100% of principal at maturity should be categorically avoided in all circumstances.

See the best savings rates here.

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