Step 1: Note your net income. The first step in creating a budget is to identify the amount of money you have coming in. Keep in mind, however, that it's easy to overestimate what you can afford if you think of your total salary as what you have to spend. Remember to subtract your deductions for Social Security, taxes, 401(k) and flexible spending account allocations when creating a budget worksheet. Your final take_home pay is called net income, and that is the number you should use when creating a budget.Tip: If you have a hobby or a talent, you may be able to find a way to supplement your income. Having an extra source of income can also be helpful if you ever lose your job.
Finally, do it again. After you have completed your first month of budgeting, it will be easier to plan for the next month. At the end of the month look at how you spent and make adjustments for categories in which you spent more than you planned, and cut back on the categories that had additional funds in them.