Figure out your income

Remember, the idea here is to keep this dirt simple. Ignore your temptation to jazz it up, at least at first, until you have the most important part -- a plan for your money -- done.

Take out a piece of lined paper. Write "Income" at the top. Underneath this, add one line for each source of income. For example, you might have a line for your salary and one for your spouse's salary.

To the right of each line, write down how much money you take home each month. If you get paid every week or two weeks, I like to assume four weeks = one month. Then when you occasionally get a month with an paycheck, it can go straight into savings. Painless!

Add a "Total" line and add up your income sources. This is how much you have to work with. If your budget total adds up to more than this, you'll need to cut back on some categories.

Figure out your expenses

Now you'll need to add one line for each recurring expense. It will probably help you to remember all of them if you list them by category.

Here's a sample list to get you thinking about what your expenses are:

Home

• Mortgage or Rent
• Property Taxes
• Homeowner's Association Dues
• Maintenance and repairs

Utilities

• Gas/electric
• Water
• Garbage
• Telephone
• Internet

Household Expenses

• Child care
• Groceries
• Toiletries and other consumables
• Clothing
• Gifts
• Charity
• Health care
• Life Insurance

Transportation

• Gas
• Auto Insurance
• Maintenance and repairs
• Tolls and fares

Debt

• Credit cards
• Car payments
• Student loans

Entertainment

• Cable TV
• Dining out
• Hobbies

Savings (after tax)

• IRA
• College fund
• Emergency fund
• Mortgage down payment
• Etc.

Once you have this done, you need to assign an amount to each line. Start with the fixed expenses, like your mortgage, that never change, and that you can't pay any less on.

Then go over the rest of the lines and write down the average amount you spend (or would like to spend) monthly on each. Once that's done, total them all up at the bottom of the sheet.

If the total is less than your income, congratulations! Take that left-over money and assign it where it would be most helpful, like paying extra on credit card debt. But make sure all of your income is accounted for.

If it's more than your income, you need to look for ways to trim the fat. Maybe you don't need to spend as much on clothes or dining out. Pare it down any way you can -- be ruthless! This is how you're going to take control of your finances.

Follow it!

Congratulations! You have a budget. The next step, of course, is to follow it. Start paying attention to your expenses and don't let yourself spend more than you've allocated. You might find the envelope budgeting system we talked about yesterday helpful here.

After a few months, you'll likely find that your estimates were off in a couple categories. That's fine; just be sure to re-allocate your money so that it's all accounted for.

You can get more complicated if you want, by working in gross income and taxes, or adding sub-categories, but the key is to get something written down so that you have a plan to follow.

This sort of budget is the foundation for getting your money under control. Once you have it on paper -- even scribbled down in a notebook -- you have taken a huge first step toward that goal!

Finally, I certainly don't have all of the ideas. If you have any advice of your own for keeping a simple household budget, I'd love to read about it in a comment!