[disneysteve]

This is a post I made a few days ago on another budget thread.

The two most important aspects of developing a budget are knowing exactly how much money is coming in and exactly how much is going out and where it is going.

The coming in part is generally easy assuming you have a steady income source.

The going out part is where you need to do some work. Start by writing down every regular, recurring expense that you have. This includes things like rent/mortgage, taxes, utilities: phone, gas, electric, water, cable, internet, insurance premiums, tuition, etc.

Then get a little notebook, carry it with you at all times, and record every penny you spend on absolutely anything for a month.

At the end of the month, sit down with your lists and divide every expense into 2 categories: Want or Need. You need to be very specific here. Phone service is a Need. Caller ID, call forwarding, voice messaging, etc. are wants. Having a car is a Need. Getting it detailed every other month is a Want. Having a TV is a Need. Having premium digital cable and a 42" plasma screen is a Want. You get the idea.

Don't forget to include expenses that don't get paid monthly, like magazine subscriptions, insurance premiums, auto registration, club dues, etc.

So once you've done all of that, look at the bottom line. If your expenses are greater than your income, you need to take a good look at that Wants column and start cutting back. If your income is greater, you're off to a good start, but you may still need to trim the Wants if you aren't saving adequately.

Don't ignore that Needs column, though. Just because you need a phone, doesn't mean you currently have the cheapest plan. Just because you need life insurance doesn't mean you shouldn't shop around and see if you can find a cheaper policy.