I've tracked my spending and have created a budget, now what do I do with it?
"I'm reminded of a conversation I had regarding food. I used the word 'diet' and got pushback, as I meant it in sense of 'what one eats'. That's what a diet is, what you eat in an average week, month, year. That list has no hidden agenda unless you want it to. If your finances are in good shape, debt under control, savings growing, etc, a budget is more of an observation than a constraint. In the same way that my bookshelf tells you a lot about who I am, books on finance, math, my religion, along with some on English and humor, my budget will also tell you what my values are.  Edit - In a recent speech, regarding Joe Biden, Hillary Clinton said ""He has a saying: ‘Don’t tell me what you value. Show me your budget and I will tell you what you value.’ "" - nearly exactly my thoughts on this.  For the average person, a budget helps to reign in the areas where spending is too high. $500/mo eating out? For the couple hacking away at $30k in credit card debt, that would be an obvious place to cut back. If this brings you happiness, there's little reason to cut back. The budget becomes a reflection of your priorities, and if, at some point in the future, you need to cut back, you'll have a good understanding of where the money is going." Having been in exactly this position (not in a debt hole, built a budget to get a better view of what spending is), I can say what the greatest gift it brings is: it's a decision tool. When you are spending out of only one account, you often make decisions based on the total money in the account. “Should we go out for dinner? Can I make this impulse purchase?” This is terrible, because many, if not all, of those dollars are already intended for certain future expenses like groceries, bills, etc. You can't see how many of those dollars are discretionary. A budget is like having many accounts. Instead of looking at your real account(s) to make spending decisions, you look at your budget lines. You to want impulse buy a gadget — do you have money remaining in a relevant budget line? If yes, the decision is yours, if no, the budget is telling you that you don't have dollars for that.* Similarly for more prosaic purchases — you want to splurge on some non-staple groceries to make a fancy dinner or try out a new recipe, and the budget line for Groceries will tell you if you can do that. Instead of looking at (e.g.) $6000 in a chequing account, you're looking at $600 (assigned) − $146.86 (spend) = $453.14 (available) in a monthly groceries budget line. Just like you can now see where your money has been going, by maintaining and using your budget lines, and having every single dollar you spend go through the budget (to show your totally assigned, total spent, and total remaining), you can continue to see where your money is going in near real-time. You're no longer looking at bills and statements to figure out what's going on and plan, you're looking at money flows and future intentions, as you should be. This approach to budgeting has completely changed our finances. So that's what a budget is for: real-time spending decision-making control over your money, which for us has translated into a lovely mix of painless austerity in spending categories where austerity is smart, and guilt-free spending in more indulgent categories because we have already determined exactly how much we can afford and wish to spend. * A budget line with insufficient funds doesn't actually take the decision entirely away from you though. If a budget line doesn't have funds to spare for a given purchase, you can still make the purchase — but now you're also making the decision to go and revise your budget, taking dollars away from other budget lines to adjust the line you've overspent, to keep the budget accurate. I think the answers you're going to receive are all going to be a bit subjective. Looking at it from a high-level point of view, having this budget nailed down lets you analyze: Now you've got your budget, stick to it! This is really the most important part. You've done your homework, now make sure you don't exceed it without a good reason. If you're under budget in any given month, have a plan on what to do with the excess funds. If you go over budget on a certain area, you can react accordingly.  I, personally, recommend hiring a financial planner. Ours has been a huge help with looking further down the line than we had been originally. If you show up to your first meeting with an FP and have this budgetary breakdown ready to go, you'll probably get a high-five. Well done, you! "Whether you use a professional financial planner or not, the basic steps are the same. It seems like you have done some detailed work on step 1, perhaps less detail (but not necessarily insufficient detail) on step 2, and concluded that you don't need to change anything in step 3. That's fine - if you concluded that you don't need to change anything, then you don't need to change anything! What you need to do from now on is There is nothing complicated or difficult about any of this. To paraphrase Charles Dickens, ""Income greater than expenditure - result, happiness. Income less than expenditure - result misery.""  Talking to a financial planner might encourage you to spend less (though of course you just acquired a new expense, ""buying financial planning advice""), just like joining to Weight Watchers might encourage you to eat less or exercise more. But in the end, it's you who have to take the action - other people can't do it for you." "Use the budget to drive down spending so you can save (for retirement, for college, for expenses) and so you can pay off your mortgage early.  Some, (Dave Ramsey, for example) advocate for an ""Envelope system""...  If your budget says 100 a month for restaurants, then at the beginning of the month, you put 100 into that envelope.  Once you've spent that much on restaurants that month, you're done for the month.  On the other hand, if you don't spend the 100, then you have two choices:  either you can adjust the budget downward and put the money somewhere else (like your Mortgage) or you can build up cash in that account so you can afford a really expensive restaurant in a few months."
A budget is a plan for spending money in the future. Tracking spending is only looking at what happened in the past.  Many people only track their spending, a proper budget can be key to achieving financial goals. You might earn enough and not spend frivolously enough that you aren't hamstrung by lack of a budget, but if you have specific financial goals, odds are you'll be more successful at achieving them by budgeting rather than only tracking spending.  I'm a fan of zero-sum budgets, where every dollar is allocated to a specific bucket ahead of time. Here's a good write-up on zero-sum budgets: How and Why to Use a Zero-Sum Budget "As your financial situation becomes more complex, it becomes increasingly more difficult to keep track of everything with a simple spreadsheet.  It is much easier to work with software that is specifically designed for personal finances. A good program will allow you to keep track of as many accounts as you want.  A great program will completely separate the different account balances (location of the money) from the budget category balances (purpose of the money).  Let me explain: When you set up the software, you will enter in all of your different bank accounts with their balances.  Perhaps you have three savings accounts and two checking accounts.  It doesn't matter.  When you are done entering those, the software will total them up, and the next job you have is assigning this money into different budget categories: your spending plan.  For example, you might put some of it into a grocery category, some into an entertainment category, some will be assigned to pay your next car insurance bill, and some will be an emergency fund.  (These categories are completely customizable, and your budget can be as broad or as detailed as you wish.)  When you deposit your paycheck, you assign that new income into budget categories as well.  It doesn't matter at this point which accounts your money are located in; the only thing that matters is that you own this money and you have access to it.  Now, you might want to use a certain account for a certain budget category, but you are not required to do so.  (For example, your grocery category money will probably be in your checking account, since you will be spending from it regularly.  Your emergency fund will hopefully be in an account that earns a little higher interest.) Once you take this approach, you might find you don't need as many bank accounts as you thought you did, because the software does the job of separating your money into different ""accounts"" for different purposes. I've written before about the different categories of personal finance software.  YNAB, Mvelopes, and EveryDollar are three examples of software that will take this approach of separating the concepts of the bank account and the budget category." Is your credit card spending on things outside the categories listed in your question? I generally don't put credit card expenditures in their own category of spending because I'm buying things like gas and groceries, etc. I track all spending whether from my checking account (bill autopay) or credit card account as spending in budget categories, and I just transfer money from my checking account to my credit card account to cover anything that was spent there during the previous month. "As THEAO suggested, tracking spending is a great start.  But how about this -  Figure out the payment needed to get to zero debt in a reasonable time, 24 months, perhaps. If that's more than 15% of your income, maybe stretch a tiny bit to 30 months. If it's much less, send 15% to debt until it's paid, then flip the money to savings.  From what's left, first budget the ""needs,"" rent, utilities, etc. Whatever you spend on food, try to cut back 10%.  There is no budget for entertainment or clothes. The whole point is one must either live beneath their means, or increase their income. You've seen what can happen when the debt snowballs.  In reality, with no debt to service and the savings growing, you'll find a way to prioritize spending. Some months you'll have to choose, dinner out, or a show. I agree with Keith's food bill, $300-$400/mo for 3 of us. Months with a holiday and large guest list throws that off, of course." "I started storing and summing all my receipts, bills, etc. It has the advantage of letting me separate expenses by category, but it's messy and it takes a long time.  It sounds from this like you are making your summaries far too detailed. Don't. Instead, start by painting with broad strokes. For example, if you spent $65.17 at the grocery store, don't bother splitting that amount into categories like toiletries, hygiene products, food, and snacks: just categorize it as ""grocery spending"" and move on to the next line on your account statement. Similarly, unless your finances are heavily reliant on cash, don't worry about categorizing each cash expense; rather, just categorize the withdrawal of cash as miscellaneous and don't spend time trying to figure out exactly where the money went after that. Because honestly, you probably spent it on something other than savings. Because really, when you are just starting out getting a handle on your spending, you don't need all the nitty-gritty details. What you need, rather, is an idea of where your money is going. Figure out half a dozen or so categories which make sense for you to categorize your spending into (you probably have some idea of where your money is going). These could be loans, cost of living (mortgage/rent, utilities, housing, home insurance, ...), groceries, transportation (car payments, fuel, vehicle taxes, ...), savings, and so on -- whatever fits your situation. Add a miscellaneous category for anything that doesn't neatly fit into one of the categories you thought of. Go back something like 3-4 months among your account statements, do a quick categorization for each line on your account statements into one of these categories, and then sum them up per category and per month. Calculate the monthly average for each category. That's your starting point: the budget you've been living by (intentionally or not). After that, you can decide how you want to allocate the money, and perhaps dig a bit more deeply into some specific category. Turns out you are spending a lot of money on transportation which you didn't expect? Look more closely at those line items and see if there's something you can cut. Are you spending more money at the grocery store than you thought? Then look more closely at that. And so on. Once you know where you are and where you want to be (such as for example bumping the savings category by $200 per month), you can adjust your budget to take you closer to your goals. Chances are you won't realistically be able to do an about-face turn on the spot, but you can try to reduce some discretionary category by, say, 10% each month, and transfer that into savings instead. That way, in 6-7 months, you have cut that category in half." You can fairly simply make a spreadsheet in your favorite spreadsheet application (or in Google Docs if you want portability). I like to make an overview page that shows how much I take in per month and what fixed bills come out of that, then break the remaining total into four to get a weekly budget. Then, I make one page per month with four columns (one per week), with each row being a category. Sum the categories at the bottom, and subtract from your weekly total: voila, a quick reference of how much you can spend that week without going over budget. I then make a page for each month that lists what I bought and how much I spent on it, so I can trace where my money's gone; the category total is just a summation of the items from that page that belong in that category.  Once you have a system, stop checking your bank balance except to ensure your paycheck is going in alright. Use the spreadsheet to determine how much you can spend at any time. Then make sure you pay off everything on the card before the end of the month so you don't incur interest. My wife and I do this. We have one account for income and one for expenditures (and around 7 others for dedicated savings.) Doing this we are forcing ourselves to keep track of all expenditures as we have to manually transfer funds from one to the other, we try to do this periodically (every Wednesday) and then keep the expenditures within what is actually on the account. It is a really good way to keep track of everything. Bear in mind that our bank provides a fast handy smartphone app where we both can check our account as well as transfer funds in less than 10 seconds. (Fingerprint authentication, instant funds transfer as well as zero fees for transfers.) Right now we have a credit card each attached to the expenditures account, but earlier we only had a debit card each and no credit cards. Meaning that when the weekly funds ran out we where simply not able to pay. We did this to mimic living only on cash and when the cash runs out you simply have to stop buying stuff. And at the same time we could accrue quite a bit of savings. I would definitely recommend this if you have problems with over expenditures. "I see you have posted other questions regarding household budgets.  This is a huge first step.  Once you see what is coming in, then list everything that goes out regularly...and then try to break down what is leftover into spending, household maintenance, gifts, haircuts, whatever...it becomes very obvious if you have x to spend and you spend 3x. I budget a certain amount of discretionary money for both my husband and myself to spend each month.  All of our basic expenses are covered under other categories, but I found out long ago that we each need some money to blow on Starbucks, DVD's, books, etc without having to defend or explain it.  If we spend too much, it digs into the next month's amount, or if we are careful, we get to carry it over. I can impulse shop guilt free because it's budgeted in. Long story short, if you set up a budget and have an amount budgeted for most reasonable expenses, and see what is left over...it becomes harder to ""unwittingly"" overspend.  When you are paying attention to your money, and start looking carefully at how you are spending it, you'll notice." With your windfall, you've been given a second chance. You've become debt free again, and get to start over. Here is what I would recommend from this point on: Decide that you want to remain debt free. It sounds like you've already done this, since you are asking this question. Commit to never borrowing money again. It sounds overly simplistic, but if you stop using your credit cards to spend money you don't have and you don't take out any loans, you won't be in debt.  Learn to budget. Here is what is going to make being debt free possible. At the beginning of each month, you are going to write down your income for the month. Then write down your expenses for the month. Make sure you include everything. You'll have fixed monthly expenses, like rent, and variable monthly expenses, like electricity and phone. You'll also have ongoing expenses, like food, transportation, and entertainment. You'll have some expenses, like tuition, which doesn't come up every month, but is predictable and needs to be paid. (For these, you'll can set aside part of the money for the expense each month, and when the bill comes, you'll have the funds to pay it ready to go.) Using budgeting software, such as YNAB (which I recommend) will make this whole process much easier. You are allowed to change your plan if you need to at any time, but do not allow yourself to spend any money that is not in the plan.  Take action to address any issues that become apparent from your budget. As you do your budget, you will probably struggle, at first. You will find that you don't have enough income to cover your expenses. Fortunately, you are now armed with data to be able to tackle this problem. There are two causes: either your expenses are too high, or your income is too low.  Cut your expenses, if necessary. Before you had a written budget, it was hard to know where your money went each month. Now that you have a budget, it might be apparent that you are spending too much on food, or that you are spending too much on entertainment, or even that a roommate is stealing money. Do what you need to do to cut back the expenses that need cutting.  Increase your income, if necessary. You might find from your budget that your expenses aren't out of line. You live in as cheap a place as possible, you eat inexpensively, you don't go out to eat, etc. In this case, the problem isn't your spending, it is your income. In order to stay out of debt, you'll need to increase your income (get a job). I know that you said that this will slow your studies, but because you are now budgeting, you have an advantage you didn't have before: you now know how short you are each month. You can take a part time job that will earn you just enough income to remain debt free while maximizing your study time.  Build up a small emergency fund. Emergencies that you didn't plan for in your budget happen. To remain debt free, you should have some money set aside to cover something like this, so you don't have to borrow when it comes up. The general rule of thumb is 3 to 6 months of expenses, but as a college kid with low expenses and no family to take care of, you won't need a huge fund. $500 to $1000 extra in the bank to cover an unexpected emergency expense could be all it takes to keep you debt free. You have to track your spending for a month, down to the cent. Without those records, the person trying to help you has no real data. Even a week would be a start.  Heck, try just doing this today.  See if it works for you. Throughout each day: Each evening: At the end of a month (or week, or whatever period you want): Each day you do it successfully it will get easier.  Let us know how it works out!  Best wishes! "As others have said, doing a monthly budget is a great idea.  I tried the tracking expenses method for years and it got me nowhere, I think for these reasons: If budgeting isn't your cup of tea, try the ""pay yourself first"" method.  Here, as soon as you get a paycheck take some substantial portion immediately and use it to pay down debt, or put it in savings (if you have no debt).   Doing this will force you to spend less money on impulse items, and force you to really watch your spending.  If you take this option, be absolutely sure you don't have any open credit accounts, or you'll just use them to make up the difference when you find yourself broke in the middle of the month. The overall key here is to get yourself into a long term mind set.  Always ask yourself things like ""Am I going to care that I didn't have this in 10 years? 5 years? 2 months? 2 days even?  And ask yourself things like ""Would I perfer this now, or this later plus being 100% debt free, and not having to worry if I have a steady paycheck"".   I think what finally kicked my butt and made me realize I needed a long term mind set was reading The Millionaire Next Door by Tom Stanley.  It made me realize that the rich get rich by constantly thinking in the long term, and therefore being more frugal, not by ""leveraging"" debt on real estate or something like 90% of the other books out there tell you." My wife and I meet in the first few days of each month to create a budget for the coming month. During that meeting we reconcile any spending for the previous month and make sure the amount money in our accounts matches the amount of money in our budget record to the penny. (We use an excel spreadsheet, how you track it matters less than the need to track it and see how much you spent in each category during the previous month.)  After we have have reviewed the previous month's spending, we allocate money we made during that previous month to each of the categories. What categories you track and how granular you are is less important than regularly seeing how much you spend so that you can evaluate whether your spending is really matching your priorities. We keep a running total for each category so if we go over on groceries one month, then the following month we have to add more to bring the category back to black as well as enough for our anticipated needs in the coming month. If there is one category that we are consistently underestimating (or overestimating) we talk about why. If there are large purchases that we are planning in the coming month, or even in a few months, we talk about them, why we want them, and we talk about how much we're planning to spend. If we want a new TV or to go on a trip, we may start adding money to the category with no plans to spend in the coming month. The biggest benefit to this process has been that we don't make a lot of impulse purchases, or if we do, they are for small dollar amounts. The simple need to explain what I want and why means I have to put the thought into it myself, and I talk myself out of a lot of purchases during that train of thought. The time spent regularly evaluating what we get for our money has cut waste that wasn't really bringing much happiness. We still buy what we want, but we agree that we want it first. "BLUF:  Your question is subjective and as such, the answer varies from person to person.   The rent you ""should be"" paying is the tricky part.  Minimum is whatever is the least you can find.  Maximum is the most you can afford.  To be financially responsible, you would live as close to that minimum as you can bear.  However, this can cause stress if you are trying to subsist on lower than you can actually bear. You have certain expenses that are required to survive.  Housing, clothing, food.  These are your needs.  Everything else is convenience or luxury. Best way to develop a budget is to list the categories of everything you have spent over several months.  Figure out a monthly amount for each one.  Divide them up into groups of things you need, things that make life bearable, and things you can do without.   Then start with your income and figure out how much you bring home each pay period.  When you get paid, allocate the money to your needs until they're all covered.  If there's anything left, fund the second group, then on to the third.  Continue tracking your spending and adjust where you allocate the money.  After 2-3 months, you'll start having a decent idea on how much you actually spend on each category.  You'll probably find areas where you're spending a lot more than you realize.   The method I've just described is the one advised by ""You Need a Budget"" software, but you don't need the software to use the method.  Though it does help. Also, if there's any debt, that goes in with the 'needs' because we all need to pay our bills." Do you plan a monthly budget at the beginning of each month?  This might seem counter-intuitive, but hear me out. Doing a budget is, of course, critically important for those who struggle with having enough money to last the month.  Having this written spending plan allows people struggling with finances to control their spending and funnel money into debt reduction or saving goals.  However, budgeting can also help those with the opposite problem. There are some, like you perhaps, that have enough income and live frugally enough that they don't have to budget.  Their money comes in, and they spend so little that the bank account grows automatically.  It sounds like a good problem to have, but your finances are still out of control, just in a different way.  Perhaps you are underspending simply because you don't know if you will have enough money to last or not. By making a spending plan, you set aside money each month for various categories in three broad areas: Since you have plenty of money coming in, generously fund these spending categories.  As long as you have money in the categories when you go to the store, you can feel comfortable splurging a little, because you know that your other categories are funded and the money is there to pay those other bills.  Create other categories, such as technology or home improvement, and when you need an app or have a home improvement project, you can confidently spend this money, as it has already been allocated for those purposes. If you are new to budgeting, software such as YNAB can make it much easier. Yes. So? Are you saying that OP was just unlucky because he didn't realize that forex wasn't covered under SIPC? I would agree with that, but then, had he read the terms and conditions and considerable paperwork that he was required to sign, he would've known.