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.
The 50ቺተ Rule of Thumb for Budgeting. You've reviewed your spending and created a budget, and now you know exactly how much you spend on your home, your car, discretionary spending, and how much you divert to your retirement accounts. That's all good, but what about your other savings, such as for an emergency? How does your financial allocation compare to the amount you should ideally spend and save?