Collect Receipts

• In order to create a budget, you need to do some preparation. This preparation includes collecting all of the receipts you have from the past month or so. These receipts reveal the items you have spent money on and how much you have spent. To get an accurate budget, only use receipts that fall within the past 12 months. Too many old receipts will give the impression that you spent much more in specific areas than you actually do.
  
  

Fixed Expenses

• Go through your receipts and put aside those that are fixed expenses. Fixed expenses are the payments you need to make that are the same each month. Examples of these types of expenses include your mortgage or rent, car payments, loan payments and utility bills, where you have a flat rate in place for payments. These expenses do not change each month, so you can easily plan ahead knowing that they do not change. If they do change because of rent increase, for example, you often are warned months in advance, so you can add it to your developing budget. Add a category for each of your fixed expense to your budget and add the fixed values.
  
  

Flexible Expenses

• The remaining receipts should be your flexible expenses. Flexible expenses are those that change each month, such as groceries, your telephone bill and your gas purchases, for example. Some of them might be applicable each month, but the total sum spent each month might vary greatly, so they cannot be planned as fixed expenses. For each type of flexible expense, add a category to the budget, so you can simply fill in amounts each month. For example, add categories such as "Food," "Gas," "Clothing" and "Friends."
  
  

Savings and Flexibility

• Compare the fixed and flexible expenses for a single month to your monthly income. If any money is left over, you can put it aside for saving. Although the budget has now covered all of your fixed and flexible expenses, it is always a good idea to have some extra money around in case of an emergency. For example, if you are hosting a dinner party for a birthday, your groceries for that month will be more than usual. Having some flexibility in your budget allows you to stick to your payment duties, but allows you to have fun with it, as well.