Do you really know how to manage your expenses?  It starts with knowing how much your take-home income is.  If there are multiple income streams, you need to add them together.  For example, you have two jobs, or there are two wage earners in the home, add it all up.

Your next step is to monitor where your income goes.  There are many methods on how to do this.  There are lots of apps available.  I won’t recommend any as some may fit your needs better than others.  Research which one might work best for you.  Some banks will allow you to auto-categorize your spending.  However, yours may or may not be one of them.  Finally, you can create a spreadsheet or simply use a notebook.  In my book, I show an example of my spreadsheet.  But if you’re not spreadsheet literate, a notebook will work perfectly.  Just be diligent in writing down every penny you spend.

Categorize your spending into three areas: fixed, variable, and savings.  Items that appear under the fixed area should include things like rent/mortgage, utilities, insurances, car payment, etc.  Any payment that is the same each month should be included here.  Variable expenses include groceries, gasoline, or household expenditures.  You can include discretionary spending here as well.  Expenses like restaurants, subscriptions, gifts, etc. can be included here.  Most people will find they overspend here.

Finally, you should have a savings category.  Make sure you are putting money into an emergency fund.  You want to build that up to at least $1,000.  You never know when a surprise issue will come up that you need immediate money for.  Once you have it build up, if you have enough left over, start putting money into your retirement funds.

Start this program by scrutinizing all of your spending for 30 days.  See where you’re over or under spending.  See where you need to cut or add.  This is the beginning of creating your budget.  It’s not hard or rocket science, it just takes a few minutes and a little focus.

Moral of the story:

Managing your expenses is not hard or overwhelming.  It just takes a little bit of time and tenacity.  At the end of each month, review how you did and make adjustments where necessary.