1. Gather every financial statement you can:  This includes bank statements, investment accounts, recent utility bills, school loans, and any information regarding a source of income or expense.

2. Record all of your sources of income: Record this total income as a monthly amount.

3. Create a list of monthly expenses: This includes housing payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings and essentially everything you spend money on.

4. Break expenses into two categories-fixed and variable: Fixed expenses are those that stay relatively the same each month and are required parts of your daily living. They will be a set monthly amount within your budget.  Variable expenses are the type that will change from month to month and include items such as groceries, gasoline, entertainment, eating out and gifts to name a few. This category will be important when making adjustments.

5. Total your monthly income and monthly expenses: If your end result shows more income than expenses you are off to a good start.  If you are showing a higher expense column than income it means some changes will have to be made.

6. Make adjustments to expenses: If you have accurately identified and listed all of your expenses the ultimate goal would be to have your income and expense columns to come out equal.  In other words, all of your income is accounted for and budgeted for a specific expense.  If you are in a situation where your expenses are higher than your income you should look at your variable expenses to find areas to cut.

7. Review your budget monthly: It is important to review your budget on a regular basis to make sure you are staying on track. By taking the time to compare your actual expenses versus what you had created in your budget, this will show you where you did well and where you may need to improve.

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