At some point in time, it's likely that we've all asked the question, "Where does all the money go each month?" Everyone wants to know but, unfortunately, very few are willing to address the one thing that can actually answer the question: creating a personal budget. Some people will fight tooth-and-nail to try every means except budgeting, claiming that they can keep track of their own spending "in their head." Certainly, a personal budget may tedious to implement at the outset, but it's a great tool to show you just where your money's going and help instill a bit of spending discipline – which, let's face it, all of us can use.

Let's start with the basics. A personal budget must have a listing of all the money that's coming into your house on a monthly basis. This includes salaries from work, child support, alimony, income from real estate investments, pensions and anything else. All of these sources as a whole make up your monthly income that can be used for household expenses. Now, add up these amounts. This is the total that you have to start with. (You might not be able to believe you actually have that much money coming into the household, especially when you open your wallet at the end of the month and the only thing that falls out is usually lint).

Next, let's tackle your expenses. What do you pay out each month? List absolutely everything, including mortgage or rent, utility bills, other loan payments, child support, alimony, credit card bills, child care, entertainment expenses, car payments, and insurance of all types. Recurring monthly bills that remain the same amount will make your budget easier to figure out, but you must also allocate money for variable expenses. Clothing, food, gas, medical co-pays, and entertainment (such as going to the movies, a play, or out to dinner) fall into this category, while monthly cable television bills and the like would be listed as recurring expenses.

Now, add up all of the recurring expenses and subtract that amount from your income. Any funds left can be used to create monthly allowances for other things. For example, if you deposit money into a savings account each month, you can record that amount as an expense. As a matter of fact, if you're having trouble saving, this is the perfect time to allocate a portion for just that purpose. Keep a running log with a budget worksheet, or use budgeting software to track where your money is going.

Keep in mind that creating a personal budget should be a family affair. Parents don't have to go it alone. Let everyone in the house contribute to the final product. After all, each person will be governed by it in some way. Your children can benefit from the financial habits that they see you implement on a daily basis. Remember, also, that budgets are not quick fixes. Just as with any other habit, it will take time to become second nature. Indeed, before it's all said and done, you may find that you have to change your original budget several times until it fits your lifestyle. An ideal budget should allow some wiggle room, but also provide enough structure for you to meet your financial goals.