This might be a simple or more complicated task depending on how you receive income each month. If you're on a set salary, you probably get the same amount of money every month after taxes. If you're on a freelance salary or paid hourly and don't work set hours, it may be harder to calculate your salary.


Don't forget to account for other sources of monthly income besides paychecks, including things like rental payments from tenants if you own properties; child support or alimony; social security payments, disability payments, or pension; or income from interest or capital gains if you have investments.Add up all the sources of monthly income and write down the total amount. This amount is your total income, and as you create your budget, all of your expenses cannot exceed this amount or you will go into debt. If your expenses are less than this amount, you will have money left over to save.
Remember that paychecks are after-tax, and so the tax must be added back in to obtain gross income.;
, Fixed expenses are those bills that come due in the same amount every month like clockwork. When you build a budget, these are the first things that you have to account for, because you can't affect the amount or choose not to pay these expenses.


Fixed expenses from housing or debt can include your rent or mortgage payment, car payment, child support or alimony payments, or credit card or personal loan debt.
List each housing or debt expense, and add them up. Housing and debt should account for about 30% of your budget. That is, if your monthly income is $5,000, your housing and debt payments should pay for no more than $1500.
Housing and auto expenses should include taxes, insurance, maintenance, and fuel (utilities).
 Taxes are a huge expense, but many people fail to account for them in their budgets. You should account for state and federal income taxes, local and property taxes, and withholdings from your paycheck such as FICA and Medicare.Taxes should account for about 25% of your budget (if your income is $5000/month, your taxes should account for no more than $1250). For some people, it will be less and the additional money will be put into your discretionary fund to use on living expenses.Locate your marginal federal tax rate for the current year by visiting the IRS's website at https://www.irs.com/articles/projected-us-tax-rates-2016.
You can change your tax burden due each year by setting number of dependents to reduce or raise spendable income.
Alternately, some people have more money taken out for taxes to get a larger, lump sum refund at end of year.
The method that works best for you will depend upon your budgeting needs.
 Insurance should include any insurance payments you must make for yourself or your dependents, including health insurance, life insurance, car insurance, and homeowners or renters insurance. However, homeowners or renters insurance is generally included in housing costs, so make sure not to count it twice.


Insurance should account for around 4% of your monthly budget. If you earn $5000 per month, insurance should be $200 or less.
 Your variable expenses are costs that come up in different amounts each month. Variable expenses can include things like food, entertainment, clothing, pet care, the beauty salon, the dry cleaners, or other places you spend your money. You may also include any money you regularly put into savings or investments in this category.


For example, if you own a dog, you may typically spend $50 on dog food per month. But some months you may need to take the dog to the vet, groomer, or a boarding kennel, which can add to the expense of having a dog substantially. That makes pet care a "variable expense" for the purpose of your budget.
The money left after your fixed and variable expenses are paid for is "Discretionary spending." That means this is money that you don't directly owe anyone but can decide what to do with each month on your own. It should be the remaining portion of your budget.
For example, a variable expense is buying food for the month, whereas a discretionary expense might be going out to eat.
 Tracking your spending will help you identify whether you are staying within these guidelines, or if you need to identify places where you can make cuts in your spending. If you spend more than your income each month, you'll go into debt. But if you can come under your budget in any area each month, you'll save money.


As you track your spending you may find that your budget may need a bit of tweaking depending on your personal circumstances-- for instance, severe medical issues might make it necessary for you to spend more money on quality health insurance. That's ok, as long as you don't exceed your monthly income in expenditures.
Figure out your monthly income.
Figure out your fixed expenses from housing and debt.
Account for your taxes.
Record your insurance costs per month.
Make a list of your variable living expenses, and put them into categories.
Track your spending for several months.
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