Maybe making money is not a problem for you.  You could have a decent salary, or few expenses to drain your income.  But you might find yourself wondering why you are still living paycheck to paycheck. 

Ideally, you want to have at least three months of expenses in an emergency fund.  This might not seem possible — even when your account starts to grow, some large expenses pop up and bring it back down to near zero.  So how do you get yourself to save?  The easiest way is to have money directly withdrawn from your paycheck into a money market or savings account.  If you never see it, you won’t miss it. 

Start small; maybe withdraw 3% each week or month.  After six months, bump it up another one or two percentage points.  Combine this with direct withdrawals for your 401(k), and you will be saving a large percentage of your paycheck with ease.  The key is to not burden yourself by trying to have too much taken out.

The best way to find out where your money is going is to keep track of it.  Write down all of your expenses during an entire month.  After that, write down your yearly expenses, like car or health insurance. Calculate your per month cost by taking the average of these.

You might be surprised where your money is going. Going out to lunch or buying a cup of coffee can really add up, especially when done on a daily or weekly basis. 

Go through each expense and decide if it can be reduced at all.  Do you need all the phone features you currently have?  Do you need all the TV channels you subscribe to?  Have you shopped for cheaper car insurance?  Is it worth it to refinance your mortgage? 

The idea is not to deny yourself a comfortable living.  It is to reduce waste, especially those month-after-month expenses you can do without.  With each expense, ask yourself if you need it or if you have shopped for a better rate lately.

Following a budget can be a good idea as well, as long as it is not too restrictive.  Your expenses can change over time, and you need to allow for that.  A good example is auto maintenance.  Don’t just add up what you pay for gas and oil changes, but also calculate all your car expenses and repairs for last year.  Your car is a year older, and more problems may arise, so add 10% to that amount and divide it by 12 to get your ballpark monthly car expenses.  Obviously this formula may not work if you had a major repair the previous year.  You might then want to get an average of the past few years.

A budget should be a guideline to help you restrict some expenses, but the biggest value is the time spent in creating it, since this is when you look at your whole income and expense picture.  If you do want to create a budget, follow the steps described above — write down every expense that occurs over the next month — and make the budget based on those numbers. 

Create your list as expenses occur. If you try to remember expenses from previous months, you are more likely to forget one that might be a major drain on your income.

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