Tracking your income and expenses

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Determine your overall income
Are you on a fixed salary where you know for certain how much you’re taking home each week? Are you a freelancer whose salary varies each month? Having a rough idea of how much money you can expect to earn is key in creating a successful budget.
•If you an independent contractor or freelancer, understand that what you bring home is not the same thing as what you earn. For example, you may bring home $2,500 every month, but that’s pre-tax. Figure out how much you’re likely to need to pay in taxes and subtract that from your monthly income to arrive at a more accurate number.
• If you are a salaried employee, don’t factor in a possible tax refund into your overall income. Your monthly income should reflect only what you bring home after taxes. If you do get a tax refund, you’ll get to do with it as you please; if you don’t, you won’t be screwed.

Identify how you’re spending money
What are the bills that you have to pay every month? Do you go out to dinner with friends every Friday night or go to the movies once a week? Looking at where your money is going will give you a better handle on tracking it.
• Break down what you’re spending into categories. This will make it easier for you to see where your money is going. Often, this simple breakdown is enough to start changing habits, especially if you didn’t fully know how much of your hard-earned money was going toward, say, booze or football memorabilia. Some categories you might use include:
•Home (mortgage, upkeep, insurance)
•Auto (loan, maintenance, insurance)
•Food (groceries vs. restaurant purchases)
•Utilities (Gas, electric, water)
•Health and fitness (medical, gym membership, grooming)
•Travel and vacation
•Personal (entertainment, shopping, clothes)
•Savings

Compare your regular expenses with your paycheck amount
Do you get a negative number? If so, you are living way beyond your means. If you have money leftover, split that money up into a few groups:
•Flex money. This should be about 10-20 per cent of your paycheck, set aside for regular expenses like that fender bender you accidentally got into staring at a pretty lady while stuck in traffic. If something you need to pay for turns out to be slightly more expensive than anticipated, your flex will have things covered.
•Savings. In an ideal world, you might save about 30 per cent of your paycheck. In the real world, you should shoot to save about 10 per cent, however big or small your paycheck is. Build up enough savings for an emergency fund (about 4-6 times your regular expenses), then start saving money to invest.
•Spending money. This is whatever is leftover after you subtract flex money and savings money. It’s what you’d spend on things like clothes, eating out or other fun activities.
Source: www.wikihow.com

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