Start with a canned budget worksheet (see link below).
Go through your check book or bills for the last two to three months and add and delete categories from the worksheet to fit your expenditures.
Think about your hobbies and your habits and be sure to add categories for these expenses.
Go through your pay stubs and calculate your average monthly gross pay.
Do the same for any interest income, dividends, bonuses, or other miscellaneous income.
For each expense category, try to determine a budget amount that realistically reflects your actual expenses while setting targeted spending levels that will enable you to save money.
Once you're comfortable with your expense categories and budgeted amounts, enter expenditures from your checkbook from the last month.
Keep track of cash expenditures throughout the month and total and categorize these at the end of each month.
Subtotal the income and expense categories.
Subtract the total expenses from the total income to arrive at your net income.
If the number is negative, your expenses are greater than your income. Your situation can probably be greatly improved by changing your spending habits.
If you have a positive net income, transfer most of it to a savings or investment account at the end of each month. Extra cash left in a regular checking account has a way of getting spent.
After you've tracked your actual spending for a month or two, analyze your spending to identify where you can comfortably make cuts.
Once you've got the budgeting process in place, take an in-depth look at your largest spending categories, brainstorm about ways to reduce spending in specific categories, and set realistic goals.