How much should your monthly budget be? A way to pick the number

First, just record three months

What you need before budgeting isn't resolve, it's data. Collect at least one month, ideally three, of actual spending. Very few people know what they really spend.

Three months filters out the weird ones. Set a budget off a single month that contained a holiday, a wedding or a trip, and you'll fail every month after.

Use the middle month, not the average

Averaging three months lets one unusual expense inflate the number. Take the middle of the three totals, then cut 5-10% from it. That's a realistic starting budget.

Don't cut deeper than that. A budget 30% below your actual spending is the equivalent of a starvation diet. It collapses in two weeks, and people spend more after it collapses.

• 1. List your total spending for each of the last three months.
• 2. Take the middle value (not the average).
• 3. Subtract 5-10%. That's this month's budget.
• 4. Run it for a month. If you come in under twice in a row, drop it another 5%.

Why 50/30/20 often misses

Splitting income into 50% needs, 30% wants and 20% savings is easy to remember, but in an expensive city housing alone pushes needs to 60-70%. Forcing your life into the ratio distorts the picture instead of clarifying it.

Start with one total instead of ratios. "Keep this month's spending under X" is a single number you can check daily with no judgment involved. Splitting by category is the next step, after the total is stable.

A budget only works if you see it daily

A budget you reconcile at month end is just a report. You find out after the money is gone. To change behavior, the remaining amount has to be visible before you spend.

The most reliable way is to keep the remaining budget on your home screen. When "$230 left this month" is in front of you every time you unlock the phone, that number is present at the moment you're choosing dinner.

If your widget can show the monthly budget and how much of it is used, you always know your remaining headroom without opening anything.

Missing the first month is normal

Most first budgets are wrong. What matters is knowing by how much. If you went over, raise next month's number by that amount, then look at spending by category and pick exactly one thing to cut.

Trying to cut several categories at once fails on all of them. One per month is twelve changes in a year.