Money is one of the leading stress factors today. People are constantly worrying about it. Regardless of your situation, there are a lot of financial responsibilities to consider. One of the most important things you can do is set up a budget. A budget will help you manage your bills and control your spending. Tracking your money is vital. If you make and use a budget, you will know exactly how much money you have at any point in time. Here is a guide to setting up a household budget.

Do some background work: This means understanding your expenses. First of all, think about all of your fixed expenses. This includes utilities, car payments, and your rent or home loan. Now is the time to bring down the cost of those recurring payments, particularly you home loan, which is most likely to be the biggest monthly payment and therefore the one where you can easily save. Some links: BankRate is worth checking for Americans, British homeowners can try Fool.co.uk’s comparison. While you’re in the mood, take some time to compare rates for any outstanding unsecured loans (eg. car loans, personal loans) and credit cards with unpaid debts (look for 0% offers on balance transfers for as long as possible). Even utilities such as your phone company and electricity provider can be changed and help bring your monthly expenses down significantly. Next, consider your variable expenses. A good way to do this is to keep a list of everything you buy over the course of a week. Document everything you purchase. First of all, this will help you understand your normal spending habits. Next, it will give you an idea of things you can cut out of your budget.

Set up your budget: You can use a simple spreadsheet like Open Office’s Calc, ZoHo’s online spreadsheet or Apple Numbers to do this. Most people use a monthly budget, but you can set it up however you want. If you are paid every other week, you may want to set up your budget based off of that. In any case, you need to list all of your income. This includes your income, your spouse’s income, and other miscellaneous income you receive. Click here to view a range of home budget templates.

Consider expenses: First, list all of the fixed ones. This includes any car payments, rent, mortgage payments, life insurance repayments, loans, and bills. Some bills are always the same, such as cable or phone bills. Other bills, such as a gas or electric bill, fluctuate. However, they are fairly easy to approximate. These are the bills you know you will have to pay every month. List all of them in one area, along with the dates they are typically paid.

Work out variable expenses: This is where you would put your credit card payments. You would also list groceries, entertainment, and clothing here. Essentially, consider anything you may have to pay that isn’t fixed. For credit cards and groceries, you probably have a good idea of what you pay each month. For entertainment, determine a reasonable amount that you feel comfortable with spending. List that amount as your budget for that area.

Planned purchases: Create an area where you can set aside money for planned and unplanned expenses. If you are planning a vacation or buying a computer in a few months, this is the area you want to list those things. Likewise, try to add some money for unplanned expenses such as car repairs. This way, you are better prepared to handle those expenses.

Savings: This is money you want to set aside that you don’t plan on touching. It is a good idea to keep it separate from your contingent expenses mentioned above. It’s there if you need it, but ideally you won’t use it. This can also be money that you can play with should you need to make up money in other areas of your budget. Zen Habits have a useful post about setting up and funding an emergency fund that’s definitely worth reading.

Once you have your budget documented, you have a fairly robust idea of your current financial situation. On a monthly basis, list your actual expenses. This will tell you how successful you were at sticking to your budget. Furthermore, you will be able to determine if some areas need adjustment. However you decide to make your budget, make sure it is something you can stick to. Budgets are there to help you, so you want to get the most you can out of it.