"If you feel demoralized and exhausted, it is best, for the sake of everyone, to withdraw and restore yourself. The point is to have a long-term perspective."
- Dalai Lama
If you feel that you need to make large budget adjustments, the first thing I would suggest is to step back from all the numbers and make an intuitive assessment about whether your goal is reasonable. I'm talking about a financial "gut check".
Is your desired lifestyle compatible with your earning potential? For example, if you imagine owning a large home, driving late-model cars, pursuing expensive hobbies, and traveling extensively, you better have an income that supports all that. Be sure to also factor in your existing debt situation and desired savings, because these are large cash drains.
If there is a big mismatch between lifestyle and income, you'll need to get that straightened out before worrying about a bunch of numbers and categories. Budget adjustments can only take you so far. If you have a big imbalance, you will need to accept a major lifestyle adjustment or career adjustment first.
It is probably useful to mentally conduct this evaluation every 5 years or so, just to make sure your career and lifestyle haven't drifted apart. Once your lifestyle is roughly in sync with your income, you can move on to the yearly budgeting process, which I will describe in my next post.