Start your budget by listing each source of income. For income from your employment, only the amount that you take home each week or month is income for budgeting purposes. When you receive interest on savings, dividends on investments, or windfalls such as raffles and sweepstakes winnings, count them as income in your budget scheme. Irregular income from seasonal employment, garage sales, or personal gifts, also goes into the income category when they affect your budget plan.

These essential living expenses occur regularly, and often require a predetermined amount. Housing costs for a mortgage or rent, utility payments, transportation expenses for work, union dues, food, telephones and similar expenses belong in this category. Life insurance, taxes, health care costs and car payments, along with school tuition and fees, also belong in this category, when applicable. Although your actual expenses for some of these items may vary slightly, use the average amount as an estimate. Compare the average to the actual cost periodically to assess the accuracy of your budget plan.

Clothing, cleaning bills and credit card payments are expenses that vary over time. In addition, the majority of these costs are not living expenses or income-generating expenses. Expenses such as pet care and charitable or religious contributions also belong in this category. Setting a budgeted amount for these expenditures helps you avoid overlooking them and keep your costs in line with your income.

A budget plan should provide a targeted amount for savings and emergencies. Even when you do not have much wriggle room, including these items helps you make the adjustments necessary to fit them into your regular budget. Set a goal of 10 percent to start with, and increase it as your income increases, or by decreasing your non-essential expenses. Include projected costs for entertainment, vacations, treats and special occasions in this category, so that you do not wreck your budget every time you want to see a movie or buy a new CD.