Budgeting
If you've followed the advice in the previous section about tracking your expenses, you're already more than halfway to creating a budget. A budget is simply a plan for how you'll spend your money each month.
What is a Budget?
For some people, a budget is a strict plan that is followed religiously each month. For others, a budget is more of a rough guideline. Either way, having some framework is better than none.
When creating a budget, it's helpful to start by listing the main categories that your expenses fall into.
The Key Insight
Think of your budget as a monthly snapshot of your personal finances. It's important to know how much money you have left over each month after paying for necessities—this is the money you can put toward savings, paying off debt, or investing.
Living below your means doesn't mean living poorly. It means being intentional about spending so you have money left over to build wealth. A great book on this topic is "The Millionaire Next Door" by Thomas J. Stanley.
The goal isn't to have the perfect budget. The goal is to have any budget that you understand and can follow. Start with rough estimates, track your actual spending, and adjust over time.