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Determine your monthly income. Determine your monthly expenses. Subtract your monthly income from your monthly expenses.

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Before paying yourself first, you need to figure out how much to pay yourself. Determining this begins with taking a look at your current monthly income. To determine monthly income, simply add together all your income sources for the month. Note that this a net amount or take-home income after deductions from paycheck or applicable taxes. If you have an income that fluctuates from month to month, use your average income over the past six months, or a number slightly below average to represent your monthly income. It is always better to choose a lower number, that way you're more likely to end up with more income then planned, rather than less. The easiest way to determine monthly spending is to simply look at your banking records for the past month. Simply add together any bill payments, cash withdrawals, or money transfers. Be sure to include any cash payments you received that were spent as well. There are two basic types of expenses to be aware of fixed expenses, and variable expenses. Your fixed expenses stay the same month-to-month and typically include things like rent, utilities, phone/internet, debt repayments or insurance. Variable expenses change month-to-month and may include food, entertainment, gasoline, or miscellaneous purchases. If tracking your expenses manually is too challenging, consider using software like Mint (or the many others like it). With Mint, you simply sync your bank accounts with the software, and the software will track your spending for you, by category. This gives you a clear, organized, and up-to-date vision of your spending. Subtracting monthly income from expenses lets you know how much leftover money you have at the end of each month. This is important to know, since it can help you to determine how much to pay yourself first. You would not want to pay yourself first and then discover you are lacking money for important fixed expenses. If your monthly income is $2,000 per month, and your total expenses are $1,600, you technically have $400 to pay yourself first with. This gives you a good baseline idea of how much you may be able to save each month. Note this number can potentially be much higher. Once you know the current amount of leftover money you have, you can take steps to reduce expenses to make this figure even higher. If you are negative at the end of the month, reducing expenses will become even more important.