What is the best way to budget your money?

slow and steady wins the race.

first, find out where your money is going. do this over the period of at least a month. track where every dime goes.

once you know where it is going, then you can figure out where to cut back, and what habits need changing.

the key is not to make any decision you can’t live with or be happy about. be realistic and balanced in your goals, and you will do well.

I found Your Money or Your Life to be a great guide for budgeting. Briefly:

1. Keep track of every cent that comes into or goes out of your life.
2. At the end of one month of doing this, you’ll have enough information to group your earning and spending into categories (make them as custom and specific as you like)
3. For every category and amount, ask yourself if your spending is aligned with your values and priorities, and whether you feel satisfied with the spending (i.e. whether the expenditure was really worth it).
4. Repeat.

There’s more to it, obviously, but when I was living this, I took home $1,000 a month. In a few months, I had $1,000 in the bank. Not long after that, I bought a motorcycle for $550 and a car for $600. All the while I maintained about $1,000 in the bank. What I didn’t do was see a movie in a movie theater for about 10 months.

- first spend less than you earn each month
– second take your income and break it into categories (eg utilities, entertainment, rent, etc. ) and assign each category an amount
– each month track what you spend in each category and adjust if need be

I personally, make a list of all my bills, then add a space for fun, then I make sure the total doesn’t go over my monthly income.

If you’ll indulge me, I’ll add a small example of why the above works:

At the time, I used to buy a McDonald’s cone for a dollar every day after lunch. After doing this for a while, I got to thinking that deep down what I really wanted was something sweet. So I thought about it and decided to switch to a 5 cent Jolly Rancher.

I’m sure many would argue that saving 95 cents a day isn’t too big a deal, but the percentage savings was obviously very substantial. The principle will work anywhere you decide to apply it.

I put everything (everything) into Quicken.

The most important thing in budgeting, I’ve found (like dieting), is to make sure you budget for fun things and gifts.