Step 1: Create an Undetailed Budget

Phase 1: Build a Foundation · Step 1 of 12

Five numbers instead of 80 categories.

In short

You don't need a spreadsheet with a line for every coffee. You need five numbers: Income, Recurring Expenses, Discretionary Income, Personal Spending, and Savings & Debt Repayment. The last one tells you, every month, whether you're getting ahead or falling behind.

Why this comes first

Every other step depends on knowing whether you have money left at the end of the month. If Savings & Debt Repayment is negative, paying off debt or saving is like bailing water with a hole in the boat. Fix the number first; everything after this uses it.

How to do it

1. Pull your last three months of bank statements.
2. Income: take the lowest month's deposits and round down to the nearest $100.
3. Recurring Expenses: take the highest month of bills that come no matter what (rent or mortgage, car payment, insurance, phones, subscriptions, minimum debt payments), rounded up to the nearest $100. Food and gas aren't recurring; they're Personal Spending.
4. Subtract to get Discretionary Income. Decide how much of it is Personal Spending.
5. What's left is Savings & Debt Repayment. If it's below zero, lower Personal Spending until it isn't.