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.
If you carry a credit card balance, the minimum payment is a "need" and it counts toward the 50 percent. Anything extra is an additional debt repayment, which goes toward this 20 percent category. If you carry a mortgage or a car loan, the minimum payment is a "need" and any extra payments count toward "savings and debt repayment."