Steps to Building a Budget
Discover Where the Money is Going
For at least a month, three if you like, keep a record of everything, absolutely everything you buy for at least a month. Get a small notebook, keep it with you everywhere you go, and then write down every purchase you make.
Categorize Your Spending
After your tracking phase is complete, look over all of your purchases and put them in categories. Common categories would include food, housing, utilities, entertainment, etc.
Total Your Spending in Each Category
Total the amount spent in each category and then separate your categories into two groups, those that do not change each month (fixed expenses) and those that change from month to month (variable expenses). Sum up and write down the totals for each group. Review the Percentages article for ideas about common percentages are used by others.
Determine the Amount Available for Variable Spending
Subtract your fixed expenses from your income, the result is what you have left for variable expenses. Lowering fixed expenses is something you can work on later if you need to. The first thing most people work on is better use of variable expense funds.
Distribute Target Expenses Across All Expenses
Enter the amount you have decided to spend in each variable expense category. Remember to allocate 10% into savings. This should be your first priority. Take a look at where you can cut down. And now you have a sanity saving budget.
Track Expenses, Compare to Budgeted Amounts, and Build Up the Cash
Keep track of what you spend in each category. Total your expenses at least once a week to ensue you are staying on track. Readjust your budget as necessary. Your most important objective is to stay within the spending limits that you set so at the end of each month you have extra cash. Money left over at the end of each month is exactly what will put you on the road to a solid financial future.