Now it is time to start tracking where all your income goes.
And I mean every last penny.
Start by writing down all the money that you have to spend each month - i.e. - your debts. These things have to be paid, so you subtract those amounts from your income.
After that, you should see how much money you really have to spend each month on discretionary items. Track how you spend that money. Each time you stop to get a coffee, write it down!
After one month of tracking down how you are spending your money, you can add up each expense into a certain category, such as, Clothing, Movies, Groceries, Eating Out, Coffee, etc.
After you get your amounts, you can start lumping like things together. Movies and Eating Out, for example, are part of the overall "Entertainment" category.
Once you have all these categories tracked and figured out, you can see how much you are spending in each category.
If you haven't realized it yet, you are at the point of having all the data needed to set up your wonderful budget!!!!
*It is very important that during this period you only spend CASH and DO NOT USE CREDIT CARDS! Using Credit Cards will completely change the integrity of your category spending, which will make the data useless for the next step - CREATING A BUDGET!