One of the most helpful actions you can take to decrease your spending is to track it for at least a month. For one solid month, write down every purchase you make—down to the cent. When I say every purchase, I mean every purchase. You’ll need to track every night out, every coffee, every taxicab ride, etc. Once you’ve tracked your spending for a month you’ll really be able to see where your money is going, and where you can cut back.
Going hand in hand with tracking your spending is creating a budget. By creating a budget you’re helping to ensure that you won’t fall victim to overspending. To create a budget, you’re going to need two numbers: First you need to know how much you’re bringing in monthly. This should include your take-home pay and any other source of income you may have. Do you have an income that fluctuates from month to month? If so, find an average for the last year. Second, you’ll need the amount you came up with when you tracked your spending for a month.
Once you have these two numbers, you’re ready to budget. Here’s what the breakdown of your spending should look like:
Are some of your expenses costing you more than the appropriate percentage? If so, you’re going to need to do some tweaking. While many expenses are fixed (your mortgage, your car payment etc.) you can likely cut back on expenses that fall under the “other living expenses” category. Take a look back through your notes from the month when you tracked your spending to come up with a budget that keeps you financially stable.