How much do you spend every month? Is it more or less than you make? You can find out by keeping a budget.
The hardest part of a budget for me is to find out how much you spend every month. In our family we allocate a certain amount of cash to each of us, then try to put as much of our other spending on credit cards every month. That way we have a record of how much we spend (plus we get the rebates).
Using our cash and credit card bills, plus some monthly deductions from out checking account, I can get a pretty good idea of our spending habits, so I can compare this to previous years and our income. Then it is just a question of finding where we have to cut back or if we are okay.
I also allocate a monthly amount to savings, which get automatically transferred to two savings accounts – a regular savings account and a Roth IRA. Since it is done automatically I don’t have to think about it and just figure it in my budget.
I use spreadsheets to do this, but you can use quicken or quickbooks to do the same thing.