Types of expense
First, you'll need to list all of your normal expenses and group them into categories. Mandatory expenses include things like mortgage, utilities, car payment, insurance, and taxes. One mandatory expense that is often overlooked is retirement savings. Even if you have plenty of time, it's crucial to save money as early as possible to allow time for invested growth.
Discretionary income includes cable TV, gym memberships, clothing expense, dining out, and other things you could do without if you absolutely had to. Most people spend far more than they think they do, so tracking monthly expenses will help. Be sure to include a field for pocket money, because the devil is often in the details – a few dollars here and there for a soda or a pack of cigarettes can add up to a potential new car payment by the end of the month. Many a budget is sunk by incidental daily expenses that people don't even realize they are spending.
Income should include any reliable source of income that comes in every month, but be careful about averaging in any amount that comes in sporadically or is huge one month and tiny the next. An average will work if you have plenty of money in the bank, but if money is tight, averaging will bring you up short on lean months. It's better to budget for the lowest amount and save the overage on good months. A good personal budget template is more practical than optimistic.