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1. A monthly budget is often the most useful; since some expenses and income items are seasonal or irregular, figure their annual amounts and then divide by 12.  What we're shooting for is an estimated picture of your future cash flow.  Why estimated?  Because, you use past figures of income and expenses to estimate your monthly budget for the coming year.

2. Take your time, be thorough, list all of your income and expenses.  Don't waste your time, though; if a certain bill (or income item) is always the same, there's no need to tally it over an entire year.  It may help to view my Budget Example at this point, not only for a glimpse at a finished budget, but also to see the categories I use and give you ideas for your own.

3. Listed below are average percentages per general expense category.  They are meant as guidelines and suggested maximums.

   Average % of Gross Income

   Housing + Utilities	25 to 40%
   Taxes (actual percent)	20%
   Transportation + Upkeep	15%
   Food	10%
   Clothing	05%
   Savings	10% and up
   Entertainment + Vacations	05%
   Debt (credit cards, personal loans)	05%
   Other Expenses	05% and up

4. As one of your regular expense items you should include payments into a savings (or investment) account (otherwise known as paying yourself first).  A good minimum savings goal is 10% of your gross income.  The importance of this step cannot be stressed enough; given enough time, it can literally bring you financial independence.  For those needing help with or further explanation on Saving, jump to my page on the subject.

5. Some expense (and income) items are not easy to figure; overall food expenditures is usually one of these.  So as not to delay your initial budget indefinitely, on these items put down your best estimate; they can always be adjusted later.

6. When you have all income and expense items listed, crunch the numbers (do the math); subtracting expenses from income.  You should have a positive amount remaining; this is your bottom line and cushion for unforeseen expenses.  A negative bottom line is a sign that you need to work at reducing your expenses.  It is often possible to reduce your living expenses without reducing your standard of living (see frugality, below).  Again, I suggest taking a look at my Budget Example page for additional help and ideas.

A closely related subject to budgeting, frugality, is gaining in popularity; it can be considered the conservation of one's finances.  There are many good books and newsletters dealing with this subject.  To access some related files for download, visit my Books & Files page.  A Web site with a good selection on the subject is: The Frugal Corner - check it out.

To help yourself organize financially I highly suggest obtaining one of the more popular personal finance programs.  The two most popular titles are: Quicken by Intuit and Microsoft Money.  These programs contain functions such as: check books, credit card accounts, budgeting, financial planning, investment tracking, online banking, online bill paying, tax records, etc..  Each program can usually be bought for under $40 and can often be found on sale for even less.  Quicken is, by far, the most popular.