1. Know your regular monthly take home pay

Your take home pay is what’s left after taxes and all sorts of deductions. In some cities, like San Francisco and New York, taxes can be as high as 30-35%. This is the recurring income you can count on. Don’t include extra income like an annual bonus or occasional overtime.

2. Divvy up your monthly take home pay into 10 units

This makes managing and prioritizing easy.

3. Assign the 10 units into 4 money bags

• Bills (rent, car payments, utilities, and loans): Keep Bills under 5 units.

• Living (food, fuel & commute, personal care, prescriptions): Keep about 2-3 units, especially if you eat out a lot. Food spend alone will run you $300-500 a month.

• Extras (entertainment, night-outs, and impulse buys): Keep 1 unit, because having fun is an essential part of life.

• Wish List (rainy day fund, debt payoff, travels, and big buys): Keep 2 units if you can. 1 unit for savings and debt payoff, and 1 unit for enjoyment like traveling and splurge purchases.

4. Think in days and weeks. Keep track of your spend towards Extras and Wish List

Keep your spend on Living to $20-30 a day. Track your spend on Extras and Wish List on a weekly basis and try to stay under budget for these two money bags. If you receive extra income, put it towards your savings. You’ll be building up a nice nest egg in no time.

5. Keep a Rainy Day Fund

Your Rainy Day Fund is what you pay for Bills plus Living in a 3 months period. Think of it as your safety net. Save towards your Rainy Day Fund first. You’ll be glad you did.