Money

How to start taming your budget-busting bills

It is often said that death and taxes are the only two things that are certain in this world.

But for many of us, having to pay your bills each month might be a close third.

Whether you have them automatically withdrawn from your bank account or you still sit down, write out checks and mail them, paying your bills keeps a roof over your head, lights on in your house and food on the table.

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For many Americans, the monthly bill-paying ritual prompts the question: Where did all my money go? Or even worse: Finding out you don't have enough money to pay for everything.

A recent survey found that 78 percent of full-time workers say they live paycheck-to-paycheck.

So what can you do to make sure you have enough money each month to not only pay your bills but also be able to save for your future and achieve your financial goals? Start by creating a budget.

Woman looking at bills and receipts on floor
Getty Images

A budget is a monthly plan that breaks down where you allocate your income into categories. It will help you take control of your money, see where it's going and point to areas where you might be able to cut costs and save money.

"A budget helps you get organized with your spending so you can meet your financial goals," says NerdWallet's personal finance writer Kimberly Palmer. "A budget is like a map with a suggested route for your money — it gives you gentle reminders and redirections when necessary."

Figure out where your money is going

How much should you be spending on housing, food, utilities, transportation? The answer of course is different for everybody — depending on where you live, size of your household — but there are general guidelines that personal finance advisers use to see if your spending is reasonable. In general, you should be spending about this percentage of your income on:

Housing: 25 percent - 35 percent
Food: 10 percent - 15 percent
Transportation: 10 percent - 15 percent
Utilities: 5 percent - 10 percent
Savings: 10 percent - 15 percent
Health care: 5 percent - 10 percent
Personal: 10 percent - 15 percent

For several months, sit down and record all of your spending. Once you have an idea of how much you are spending in each category you can determine where you might be able to cut down and save.

A budget is "a way to hold yourself accountable on your spending," Bankrate.com chief financial analyst Greg McBride says. "If you don't know where you are spending, you don't know where to cut back."

Another budget guideline used by financial advisers is the 50/20/30 rule. It divides all of your expenses into three broad categories instead of a list of 10 or more specific categories. The basic idea is that:

► 50 percent of your budget goes to necessities or essentials, like housing, food, utilities, transportation. Oftentimes these are fixed costs.

► 20 percent of your budget is allocated to savings, debt payment and long-term financial goals. This would include money you contribute to your 401(k), IRA and an emergency fund.

► 30 percent of your budget is for personal needs and wants. This category involves flexible spending and is based on lifestyle choices.

This budget guideline places a high target on paying yourself first by allocating 20 percent to savings. It also can show you areas where you can cut down your flexible spending and which of your fixed costs are too high and should be targeted.

The key to any budget is getting an accurate picture of your income and spending.

Seeing where your money goes is the first step to getting a hold of your monthly bills.

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This article originally appeared in USA Today.