Track Your Spending

• 1). Track your daily spending for at least one week to understand where your money goes and how you can trim daily expenditures. Keep track of every cent you spend and on which items. For example, write down the amount you spend if you purchase lunch and coffee every day during the work week. Create simple categories, such as lunch, health and beauty or entertainment, for each expense. Also, keep receipts.
  
  
• 2). Calculate the total amount of your daily expenditures. For example, if you spent $7.50 and $2.50 for lunch and coffee five days a week, your total expenditure for lunch and coffee is $50 per week, $200 per month or $2,600 each year.
  
  
• 3). Record the amount of money you would like to trim from your daily spending. For example, you can trim your daily spending on fast food. Purchasing groceries yields more for less and can help you save for an emergency fund. Allocate the money you save from daily spending for other purchases, bills or a savings account.
  
  

Design Your Budget

• 1). List the sources and amounts of your income. You can start with your gross income and subtract the taxes and other deductions or begin with your net income.
  
  
• 2). Create a listing of your monthly expenses. Expenses are either fixed or flexible. Fixed expenses include amounts that you pay on a schedule at a fixed price. Credit card, rent or mortgage and car and student loans are examples of fixed expenses. Flexible expenses may or may not have a set price, but you can reduce or eliminate the obligation. Magazine or entertainment subscriptions, groceries or nonessential health or beauty products are examples of flexible expenses.
  
  
• 3). Categorize your expenses. Start by creating a broad listing. Your list should include housing, transportation, daily living and entertainment at minimum. The broad categories should include subcategories such as rent or mortgage, utilities, gas, lunch, entertainment and health. Categories will help you place limits on the amount you spend weekly or monthly. For example, if you would like to cut back on entertainment expenses, categorizing your expenditures helps you identify entertainment-related purchases. As a result, you can cut spending in a given month should you reach the maximum allotted amount.
  
  
• 4). Select the maximum amount you can spend comfortably in each category. For instance, if you would like to only spend $40 monthly on nonessential health products, allocate this amount of income to this category.
  
  
• 5). Select specific financial goals you would like to attain. Your first savings effort should go toward an emergency savings account. Calculate the amount of money required to live for three to six months should you lose your earning source. Emergency funds should include the rent or mortgage, utilities, groceries, telephone, credit cards, car loans and other credit-related or essential expenses. Once your emergency fund is secure, you can reallocate those savings toward future expenses such as a house or an education for a child.
  
  
• 6). Subtract your total expenses from your total income. If the remaining balance is positive, allocate the funds to your savings category. If the remaining balance is negative or you break even, review your expenses to identify items you can eliminate. Some examples include cable bills, dining out or nonessential subscriptions such as health clubs.
  
  

Implement Your Budget

• 1). Continue to track your spending. Tracking ensures you do not exceed your budget for any given category. If possible, identify a pattern in your flexible expense spending. For example, if you purchase $200 in groceries monthly, track your purchases to ensure you do not exceed your monthly budget.
  
  
• 2). Replace money in categories in which you overspend, if necessary. Starting a budget is difficult for many people and some overspend in specific categories as they adjust. If you spend more money in one month on a given category, compensate for the expenditure in the following month. For example, if you spend $250 on groceries with a budget of $200, only spend $150 in the following month. Allocate the $50 toward your savings account.
  
  
• 3). Revisit your budget on a biweekly or monthly basis. Your budget will become outdated as you move forward. Changes in expenses or income require an adjustment. Make sure you review your budget regularly to incorporate any changes.