Step Two: Limit Your Needs to 50 Percent of Your After_Tax Income. Now go back to your budget. How much do you spend on "needs" each month, things like groceries, housing, utilities, health insurance, car payment, and car insurance? According to Warren and Tyagi and their 50ቺተ rule, the amount that you spend on these things should total no more than 50 percent of your after_tax pay.
Step 4: Make a plan. Use the variable and fixed expenses you compiled to help you get a sense of what you’ll spend in the coming months. With your fixed expenses, you can predict fairly accurately how much you’ll have to budget for. Use your past spending habits as a guide when trying to predict your variable expenses.