Step 2: Track your spending. It’s helpful to keep track of and categorize your spending so you know where you can make adjustments. Doing so will help you identify what you are spending the most money on and where it might be easiest to cut back. Begin by listing all your fixed expenses. These are regular monthly bills such as rent or mortgage, utilities or car payments. It’s unlikely you’ll be able to cut back on these, but knowing how much of your monthly income they take up can be helpful.
Step One: Calculate Your After_Tax Income. Your after_tax income is what remains of your paycheck after taxes are taken out, such as state tax, local tax, income tax, Medicare, and Social Security. If you're an employee with a steady paycheck, your after_tax income should be easy to figure out. Look at your paystubs. If health care, retirement contributions, or any other deductions are taken out of your paycheck, add them back in.