Opinions will differ, but in my case the following was essential:
Track everything you spend in a month (every single purchase)
Make a budget with categories based on that spending. There will likely be areas where you've spent more than you'd guess beforehand.
Adjust the budget. There are numerous tips in MMM's article and in the forum for reducing costs.
Rinse and repeat.
Good luck!
+1
I will add three things: the "pay yourself first" principle, keep a history, and track your net worth.
What is meant by Pay Yourself First (I first read the term in 'the automatic millionaire') is that you make paying your retirement fund, and all other mid/long term funding goals as automatic bills. 'Pay yourself' before you get to your spending budget. Pay yourself first before figuring out how much rent you can afford. Pay yourself first before you figure out how much car payment you can afford (not that as a mustachian you'd take on a car loan, but it's here for compeletness). Stores figured out that people will pay monthly bills pretty much no matter what, and they'll take on a lot of them until there is almost nothing left. That is why everything from TVs to Matresses now come with payment plans. Make your future-self your first and most important payment plan.
I've taken to paying myself even outside of automatic bills. After years of recording every single dollar saved and spent, I know myself well enough to know that I will end pretty much every month with a zero bank balance. I'm not a natural saver. If I have $200 available to me, I will justify some way to spend it on something.
Instead, I chose to "spend" on long term savings. In addition to my automatic contributions, when I have excess cash, I buy investments instead of toys. Sometimes it is stocks, sometimes it is extra payments on the mortgage. Because I track both of these, I can watch these go up and get a sense of satisfaction (and consumer-high) by buying them instead of the latest iToy.
Secondly, I would suggest that however you track your spending & budget, you keep a history. At the end of every year, roll up totals spent on each category; this will be useful to see how much more bad ass you are getting, and for future budget planning.
Lastly, keep a tally of your Net Worth (value of major assets, cash, savings, investments, and debts), and update it once or twice a year, keeping your old values. Your net worth is a much better yard stick for how you are doing than your income (the only thing many people pay attention to). Again, having the history lets you watch it grow (for that feeling of progress) and shows you when things are getting off track ('why did my net worth only go up $2000 last year when it went up $5000 the year before?'). Knowing how, how much, and why your net worth is changing is an important part of being truly financially
independant. But for now, just counting it up, and holding on to that number is enough.
