After you understand what your fixed monthly obligations are, take a close look at your variable expenses. These are expenses that might change from month to month. The amount you spend on variable expenses usually depends on your behavior in a given month. Consider a simple night out. Perhaps you enjoy a modest dinner and a movie. The more you do this in a month, the higher that expense is. Some months you may do it often, and in other months you may spend your evenings doing other things. Your eating out and movie expenses vary depending on your behavior.

Track Your Spending

Do the best you can to track your variable expenses. You can do this in as much or as little detail as you like. The more detail you have, the better. Some experts recommend keeping a note pad with you and making a record every time you spend money. You might also be able to make these records in your personal digital assistant (PDA) or your cell phone. If you actually record every expense, you'll have a very clear picture of where your money is going. Most people do not do this, but those who do have a much easier time managing their spending. The problem is that most people have no idea where their money is going. There's nothing wrong with that if you have a lot of money, but it only hurts you if you have to manage your spending.

If you don't record every single expenditure, at least find a way to track your spending with some sort of category system. You might have categories for entertainment, lunch, dinner, gas, gifts, charitable giving, coffee, nights out, and so on. Again, the more detail you use the better. With a simple category system, you should be able to track the vast majority of your variable spending.

Just like you did with your fixed expenses, you should arrange your variable expenses from largest to smallest. Then, take a deep breath and see what you're spending your money on. Are there any shocking surprises in this list? If so, that's where you need to spend your energy. You'll need to change your behavior to spend less money on those items.

Lots of Emergencies

What if your variable spending is all on emergencies? If you tend to spend a lot on emergencies, see if you can pinpoint a common cause. For example, if your car constantly breaks down and requires emergency maintenance, you might need a new car. Run some simple numbers and see if you would actually save money by buying a new car. If you don't have the ability to buy a new car, consider saving up for one. Look for causes and alternative solutions to your emergency spending.