Write down what you spent last month. Use Categories like mortgage, food, entertainment, clothing, transportation and savings. Savings is an important category. Is there something you should be spending your money on that you didn't last month, but that you think you should. Already the process begins to uncover things you want to know Write down what you expect to earn next month. If you are on a variable income, it might be helpful to put this in three columns: The minimum you expect, an average of what to expect, and the highest amount you expect to earn. Don't count on the highest number, but it is a great goal setting exercise to strive for that high number on a monthly basis. Write down what you KNOW you will spend next month. Fixed expenses like mortgages, property taxes are known amounts. They are constant every month and don't change. While you can change your rent or mortgage amounts by moving, it is unlikely that you will do this next month. So consider these Fixed expenses.
If you don't allow for a certain amount of mad money for you and your spouse soon resentment will start to set in. Each party will get very frustrated about having to stick to such a strict budget and not having any money for fun. Likewise, even if some money is allocated in the budget for fun, one of the partners may get tired of not being able to spend some money how he or she would like. This special money even allows you to save some money for a larger purchase you may want to make. _ Even if money is extremely tight in your monthly budget, it is highly recommend to allow each spouse a small amount of mad money to help make the budget work. Everyone is more willing to save and track their spending if they are allowed a certain amount of mad money to spend how they wish.