A budget is not about money, it is about lifestyle. Your budget is a reflection of your life design. The goal of a budget is to maximize you happiness and fulfillment.
Of course, your lifestyle requires money, but the focus of creating a budget should be on creating the best lifestyle you can within the constraints of the money you have.
Your lifestyle is broken up into the different categories you need to pay for.
You start with all the parts of your lifestyle that have fixed costs. These include your mortgagee, car payments, insurance, utility bills. These amounts don’t change.
Then you create the categories that represent the parts of your lifestyle you have to pay for but the amounts can vary. These include things like food, clothing, house maintenance, gas.
Finally, you have the discretionary categories where you can still live with or without these things in your life. I include vacations, savings, big purchases you are saving up for. I also use two general categories: luxuries and experiences.
Experiences are going to result in a happy fulfilled life so it should have the same or more money allocated than the luxuries.
Once you have the items and you have set the fixed amounts and the minimum amounts in the categories you have to have, play with the amounts in the different categories with a focus on how happy and fulfilled your life will be based on the amounts.
Don’t forget to think of short-term happiness and fulfillment and long-term.