Determine your total net monthly income (after all taxes and deductions). This can include any income from an employer, a business, the government or rental property. Record this in your budget.

Beside each expense, enter the estimated amount that you typically spend each month.

For irregular expenses, or those you do not incur every month, calculate the monthly average. For example, if you spend approximately $800 every four months on the water bill, then the monthly expense is $200.

For sporadic or inconsistent expenses, such as vehicle repairs, you can calculate an estimated monthly amount based on the total amount spent in the last six months. Common expenses include:

Add up the monthly expenses. Deduct the total expenses from the total income. If you are in the positive, the difference between the two numbers (the surplus) can be put toward savings or used to make monthly debt payments. If you are in the negative (a deficit), review the expenses carefully to find any amounts that can be reduced. Consider if there is any way to increase your income as well. Revise the budget until the income minus the expenses gives you a positive number.

For the next one to three months, compare your actual spending with the amounts listed in your budget. If any of the items on the budget are underestimated compared to your real-life spending, decide whether you should cut back on your spending in that area, or if you should take funds out of another expense to put toward it.

Use it as a daily reminder of how much you can afford to spend on discretionary expenses. Ensure that it is being followed. If it isn’t, ask yourself what you can do to fix it.