Step Four: Calculate the total for each of the five categories: Home, Travel, Debt, Savings, and Other.

Don't be alarmed if your totals exceed the recommended parameters at this stage. That's why you're creating an Initial Budget - to get a sense of which items need to be adjusted. This is merely your starting point.

You may already recognize some areas where you can make immediate reductions. As in our opening example with coffee, when you are confronted with the actual amounts of some of your expenditures, the decisions become easier to make.