This is how we do it.
I added up all our fixed monthly bills- in our case, they look like this:
Mortgage, $350 (our payment + 10%)
Electric, $86
Nat. Gas (cooking fuel, hot H20, some heat) $75
Water, Sewer, Trash, Recycling, $80
DSL, $20
Debt Reduction, $150
Total: $661
That's everything we absolutely *must* pay on a monthly basis. The utility figures are based on either an average budgeted by the utility company or our "high"- a typical bill from the winter months.
Okay, then we have the "escrow" category. These are real, non-negotiable bills, but they fall annually or semi annually.
Property Taxes, $1200
Homeowner's Insurance, $430
Car Insurance, $700
Car Registration, $90
Cell Phone Minutes, $300
Pellets (heat), $750
Total: $3470/12 = $289/mo.
We put a absolute minimum of $250 a month in escrow, and shoot for $300. (We can always cut down on the cell phones if need be, and we typically buy more pellets with $750 than we actually use during heating season, so this is a slightly highballed budget.)
So, our monthly expenses total $991. Plus, you figure things like oil changes, durable household goods, clothes, etc., and I go ahead and up the total to $1100.
DH gets paid biweekly, so I put $550 of each paycheck aside.
$150 per paycheck goes into eTrade (a high yeild online savings account that we use as escrow).
$400 per paycheck goes into our credit union checking account. This is the money we pay bills with.
Our spending money comes out in cash, and we use this to buy groceries ($350- usually $250-$300 one paycheck, and $50-$100 the next), and gas (around $150/mo, depending on the season.)
Since DH makes between $1000 and $1100 per paycheck, this gives us about $300 every two weeks in discretionary income. We try to save this- we haven't been doing very well, lately, as we got hit with some unexpected medical and travel expenses, but because we have $600 a month "extra" every month, we've been able to pay them down promptly, all while going a little nuts buying baby stuff.
Also, two months out of the year, DH gets three paychecks. We sock away most all of these two "extra" paychecks (except for gas and grocery money), and this $1800 or so is what we for holiday/birthday gifts and travel.
Our tax returns go to pay down my student loans and, once those are gone, will go toward paying our mortgage off early.
This system seems a little more complex than it is. We had to figure out a way to pay for everything essential out of DH's biweekly paychecks, and this was the simplest system we were able to come up with. It took us about two years to get here, basing everything on his income, our expenses, and when things are due.
This system allows us a little room for savings- we usually have around $150/mo left over (out of the bill money) at the end of the month, and that goes into eTrade. Plus, since we almost always put away $300 for escrow, that extra $11 a month slowly accumulates, plus we usually *don't* spend everything we budget for escrow- as I said, it's a slightly highballed budget.
So long as we have $1000 in an emergency fund, we are more focused on debt elimination than we are saving. And we are doing well- we are on track to pay our house off in ten more years, and I'm going to try to shave a little more off so we are mortgage free by the time I'm 40.
We have other systems in place for saving for retirement and college- that comes directly out of DH's gross pay, so it's pretty painless. Same with our health coverage.
I know this exact system won't work for you- unless you're my doppleganger or something- but I thought explaining the process of how we arrived here would be illuminating.
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