3 Simple Steps to Efficiently Budget Everything

Picture a mountain of hundred-dollar bills, stacked higher than a heavyweight champion. Four hundred thousand stacks, to be exact.

That’s roughly what Mike Tyson earned in his prime – over $400 million.¹ Enough to buy islands, build castles, live like a modern-day Midas. Imagine the private jets, the mansions sprawling across acres, the exotic animals prowling manicured lawns.

Now, picture that mountain crumbling, dissolving into a sea of debt. Imagine the creditors circling, the lawyers arguing, the whispers of “bankruptcy” echoing through the halls of power.

That’s the story of Mike Tyson. A man who possessed seemingly limitless wealth, who could obliterate opponents with a single blow, yet ultimately lost the fight against financial ruin.

Tyson’s story isn’t about the amount of money, it’s about the management of it. Lifestyle inflation creeps in at every income level, and surprisingly, high earners are often the most susceptible to living paycheck to paycheck. When expenses rise alongside income—bigger homes, luxury cars, endless subscriptions—it’s easy to feel just as financially strained as someone earning far less.

You might be thinking, “Okay, great story about a millionaire going broke, but what does that have to do with me? I’m not rolling in millions, I’m just trying to make it to the end of the month!” And that’s precisely the point.

Whether you’re earning minimum wage or a six-figure salary, the principles of budgeting, expense tracking, and mindful spending are essential. Because let’s face it: financial chaos doesn’t discriminate. It doesn’t care if you’re a world-famous boxer or a struggling student.

Without a plan, even modest incomes can vanish into thin air, leaving you stressed, vulnerable, and one step closer to your own personal financial knockout. It’s time to take control, no matter your current situation, and build a foundation for a more secure and fulfilling future.

1) Building Your Budget Fortress: It’s Easier Than You Think

Gathering Intel: Know Your Battlefield (and Your Paycheck!)

Before you can allocate your resources, you need to know exactly what’s coming in. This means calculating your net income – that’s the money that actually lands in your bank account after taxes, insurance, and any other deductions.

Don’t just look at your gross salary and assume you have that much to play with! Dig into your pay stubs, add up any side hustle income, and get a clear picture of your monthly cash flow. This is your starting point, your base camp.

The Two Main Budgeting Methods: Choose Your Weapon

There’s no “one size fits all” when it comes to budgeting. Luckily, there are a couple of popular methods to choose from, each with its own strengths:

1. The 50/30/20 Rule: Imagine your budget is a balanced meal. The 50/30/20 rule suggests dividing your net income into three categories:

   • 50% for Needs: These are your essentials: housing, food, transportation, utilities, minimum debt payments. The things you absolutely can’t live without.
   • 30% for Wants: This is where the fun stuff comes in: entertainment, dining out, hobbies, that unicorn avocado slicer you’ve been eyeing.
   • 20% for Savings/Debt Repayment: Building an emergency fund, investing, paying off high-interest debt (credit cards, student loans). Your future self will thank you.

The beauty of the 50/30/20 rule is its simplicity and flexibility. You can adjust the percentages slightly based on your individual circumstances.

Living in an expensive city? You might need to allocate more to “Needs.” Debt-free and focused on retirement? Pump up the “Savings/Debt” category.

2. Zero-Based Budgeting: Every dollar has a job. Think of this as assigning a specific task to every single dollar you earn. You start with your net income and then subtract all your expenses (needs, wants, savings, debt payments) until you reach zero. It sounds intense, but it forces you to be incredibly mindful of where your money is going. For example, if you get paid $3000 a month, you’d list out every expense like this:

   • Rent ($1200)
   • Groceries ($400)
   • Netflix ($15)
   • Savings ($1385)

This way, your budget for expenses matches your income with savings accounting for every dollar that you don’t spend. Once you reach $0, every dollar has its purpose.

Ultimately, the best budgeting method is the one you’ll actually use consistently. Experiment with both, see which one clicks, and don’t be afraid to adjust the rules to fit your own lifestyle.

I’ve adopted a hybrid style that combines the detail oriented aspect of tracking every dollar from the zero-based budgeting while thinking of every item as falling into one of the three needs, wants, savings categories. This works well for me after having tried both methods and picking the parts I liked about them.

2) Expense Tracking: Unmasking the Sneaky Spending Gremlins

Why Track? Because Knowledge is Power (and Saves You Money!)

Let’s be honest: most of us have a vague idea of our big expenses (rent, car payment, etc.), but it’s the small, seemingly insignificant purchases that really add up. That daily latte, the impulse buys at the checkout line, the subscriptions you forgot you signed up for… these are the “spending gremlins” that can sabotage your budget.

Tracking your expenses shines a light on these hidden leaks, allowing you to see exactly where your money is going. Only then can you identify areas where you’re overspending and make informed decisions about where to cut back. Think of it as a financial CSI investigation: you’re gathering evidence to solve the mystery of “Where Did All My Money Go?!”

Tracking Methods: Choose Your Weapon of Gremlin Detection

1. Spreadsheet Templates (Free): If you’re a DIYer, a simple spreadsheet using Google Sheets or Microsoft Excel can work wonders. There are tons of free templates available online.

   • Pros: Free, customizable, gives you complete control.
   • Cons: Requires manual data entry, can be time-consuming.

2. Budgeting Apps (Free & Paid): Apps like Mint (free), YNAB (You Need a Budget - paid), and Personal Capital (free with paid options) can link to your bank accounts, automatically categorize transactions, and provide insights into your spending habits.

   • Pros: Convenient, saves time, provides detailed reports and visualizations, can identify trends you might miss.
   • Cons: Can be a security risk, relies on accurate categorization (you might need to manually recategorize some transactions), can lull you into a false sense of security if you’re not actively reviewing the data.

3. Pen and Paper (Free): Don’t underestimate the power of a good old-fashioned notebook! Writing down your expenses can make you more aware of your spending habits. Every time you spend money, you write it down in a notebook or enter it into a spreadsheet. Be detailed! Note the date, the vendor, the amount, and the category (more on that in a minute).

   • Pros: Forces you to be incredibly mindful of every purchase, no tech skills required, completely customizable.
   • Cons: Time-consuming, requires discipline, easy to fall behind, prone to human error.

4. The Envelope System: Old school, but still cool. This method is especially effective for categories where you tend to overspend, like groceries or entertainment. You allocate a certain amount of cash to each category and put it in a labeled envelope. Once the envelope is empty, you’re done spending in that category for the month.

   • Pros: Forces you to be very conscious of your spending in specific areas, helps you stick to a budget, good for visual learners.
   • Cons: Requires using cash, can be inconvenient, not practical for all categories (like online shopping or rent).

Categorizing Like a Pro: Sort Those Spending Gremlins!

Regardless of which tracking method you choose, it’s crucial to categorize your expenses. This allows you to see where the bulk of your money is going. Here are some common categories:

• Housing: Rent/mortgage, property taxes, insurance, repairs.
• Transportation: Car payment, gas, insurance, public transport, maintenance.
• Food: Groceries, dining out, takeout, coffee.
• Utilities: Electricity, gas, water, internet, phone.
• Entertainment: Movies, concerts, sporting events, subscriptions, hobbies.
• Personal Care: Haircuts, cosmetics, gym memberships.
• Healthcare: Doctor visits, prescriptions, insurance premiums.
• Debt Payments: Credit cards, student loans, personal loans.
• Savings: Emergency fund, retirement, investments.
• Miscellaneous: Gifts, clothing, personal items, anything that doesn’t fit into the other categories.

Be as specific as possible! For example, instead of just “Food,” break it down into “Groceries,” “Dining Out,” and “Coffee.” The more granular you are, the better you’ll understand your spending habits.

Regular Review: The Weekly/Monthly Expense Autopsy

Tracking your expenses is only half the battle. You also need to regularly review your data to identify trends and make adjustments. Set aside time each week or month (mark it on your calendar!) to analyze your spending.

Check whether you’re sticking to your budget, where you’re overspending, and what categories you can cut back in. This regular review is crucial for staying on track and making sure your budget is working for you.

Don’t just passively track your expenses; actively analyze them and use the insights to make smarter financial decisions. The spending gremlins may be sneaky, but with consistent tracking and analysis, you can unmask and banish them from your budget forever!

What I Do

I use a combination of Personal Capital and Notion to track all of my expenses. I’ve securely connected all of my bank accounts, credit cards, venmo, paypal, and even investment accounts via Empower’s Personal Capital app and log on each morning to check for updates.

It automatically pulls data about transactions and balances and gives me a summary of my finances so I can stay on top of changes. There are even tabs for cashflow and budgeting that show me detailed reports breaking down my income minus expenses and automatically calculating the percentage of my monthly spending by category.

Just to have more manual control over my tracking, I created a Notion database template with how much I spent and what I spent it on everytime I make a purchase. Notion lets me reorganize this information any way I want to so I’ve created visualizations grouping my expenses by category and month so I can get a high level overview of where my money is going and the trends across years.

After I receive a closing statement from each of my credit cards, I immediately verify that I recognize all the transactions on the statement and pay it off. This is enabled by diligently tracking my expenses and ensuring that they don’t exceed my income.

3) Operation: Eliminate the Excess (AKA: The Fun Part!)

Identifying the Culprits: Where Are You Really Overspending?

This is where honesty comes in. Now that you’ve been tracking your expenses, take a hard look at the data.

Where are you consistently overspending? Is it takeout food? Online shopping? Those impulse buys at the gas station? Be brutally honest with yourself. Don’t sugarcoat it!

This is a no-judgment zone, but it’s also a truth-telling zone. Identifying your biggest spending weaknesses is the first step to conquering them. This isn’t about deprivation; it’s about making conscious choices and prioritizing what truly matters to you.

Needs vs. Wants: The Great Debate (and Self-Deception)

This is where things get tricky. We often think our “wants” are “needs.” That daily latte might feel essential, but is it really?

Challenge yourself to re-evaluate what you consider a “need.” Housing, food, transportation – those are true needs. But the specific type of housing, food, or transportation? That’s where the lines blur.

Seriously question those ingrained spending habits. What feels like a need might just be a well-marketed “want” disguised as a necessity. Remind yourself that corporations are constantly figuring out ways to increase their income by tricking you into spending yours.

The 30-Day Rule: The Impulse Control Savior

Before making any non-essential purchase (especially those tempting online impulse buys), wait 30 days. Put it on a “wish list” or in your online shopping cart, and then… walk away.

After 30 days, revisit the item. You might find that you no longer want it, or that you can find a cheaper alternative. This simple rule can save you hundreds, if not thousands, of dollars a year.

Finding Joy in Less: The Mindset Shift

Ultimately, cutting back on spending is about more than just saving money. It’s about shifting your mindset and finding joy in experiences rather than material possessions.

Instead of buying the latest gadget, spend time with loved ones, explore nature, learn a new skill, or volunteer in your community. These experiences will bring you far more lasting happiness than any material possession ever could.

As we’ve covered in our psychology articles about hedonic adaptation, you might think that buying a new gadget will bring you long lasting joy but research studies have shown time and time again that they only provide a short burst of dopamine that wears off within a few hours or days, leaving you in a spiral of wanting the next shiny toy.

Remember, the goal isn’t to live a life of deprivation, but to live a life of intention. To spend your money on things that truly matter to you and bring you joy. It’s about quality over quantity, experiences over possessions, and freedom over debt.

Maintaining Momentum: Budgeting as a Lifestyle

Think of budgeting like learning a new instrument or getting in shape. It takes time, practice, and consistent effort to see results. You’re not going to become a financial ninja overnight.

Don’t get discouraged if you don’t see immediate progress. Just keep at it, day after day, week after week. The more you practice, the easier it will become, and the more ingrained it will be in your daily routine.

Let’s be real: everyone makes mistakes. You’re going to overspend sometimes, you’re going to forget to track your expenses, you’re going to give in to temptation.

That’s okay! Don’t beat yourself up about it. The key is to acknowledge the slip-up, learn from it, and get right back on track.

A single splurge doesn’t derail your entire financial journey. It’s like a small detour on a long road trip. Just readjust your course and keep moving forward. The most important thing is to not give up altogether.

Your budget isn’t set in stone. It’s a living, breathing document that needs to be adjusted as your life changes.

• Did you get a raise?
• Did you lose your job?
• Did you move to a new city?
• Did you start a family?

All of these events will impact your income and expenses, and your budget needs to reflect those changes.

Set aside time every few months to re-evaluate your budget and make sure it’s still aligned with your goals and your current situation. A static budget is a recipe for disaster. A dynamic budget is a roadmap to financial success.

Conclusion: Your Financial Future Awaits!

From Mike Tyson’s cautionary tale of riches to rags to the nitty-gritty of tracking your daily latte, we’ve covered a lot of ground. The core message is this: financial well-being isn’t about how much you earn, it’s about how you manage what you have.

By building a budget fortress, unmasking those sneaky spending gremlins, and eliminating excess spending, you’re taking control of your financial destiny and paving the way for a more secure and fulfilling future.

Remember, this isn’t a quick fix; it’s a lifestyle change. It takes time, effort, and a willingness to challenge your ingrained spending habits. But the rewards are well worth it: reduced stress, increased savings, and the freedom to pursue your dreams without the weight of financial worries holding you back.

Ready to take your financial journey even further? Be sure to check out our related articles on strategies for further reducing your spending and creative ways to increase your income. Because while controlling your expenses is crucial, boosting your income can provide even more breathing room and accelerate your progress towards your financial goals.