Budgetting - the easy way

As most of you know I have been an accountant since I first started work as a trainee accountant back in 1982. In that time I have learnt the hard way about finance and debt and assisted many businesses and families with their accounting and financial situations. I am a big fan of simple methods of tracking income and especially expenses and have developed on my Dad's basic methods.
I have been recording our financial position for some time and wanted to share what we do. We use Quickbooks as I need to invoice clients. For most personal use, such as when I was in the US, I just used Quicken. ALL our expenses, whether cash, cheque (check) or credit card are recorded in the system.
I don't go in too much depth but it is really important to measure what you spend. You can't cut costs or change spending patterns if you do not know what they are. Also, tracking all expenses means I now what is due on any credit cards before the statement arrives. Online banking is a marvellous measuring tool.
I stick to two broad categories of Discretionary and Regular, then subdivide into the actual expenses. This helps me to determine where I can quickly cut back if I have a change in circumstances.
Regular
Regular and consistent costs which I can't avoid or stop easily
- Supermarket
- Motor Vehicle (split into Fuel, Tolls, Registration/insurance/services/other)
- Mortgage Interest/Rent
- House expenses (split into electricity, gas, repairs, heating, etc)
- Telephone (split into each number)
- Medical

Discretionary
Costs which can be stopped instantly and/or cheaper options put in place
- Takeaway/Restaurants
- Clothing (Opportunity Shops/Thrift stores//Hand-me-downs are the option)
- Entertainment (split into DVD/Videos, Cinema, other)
- Education (as we homeschool we can reduce this if needed)
- Lana Craft (Quilting, Cross stitch, etc)
- Other crafts
- Software

The last six months for us is pretty indicative as it has been a steady time and all the transition costs are over. In total we spent $22,000 AUD ($16,500 USD) for everything. That's not bad for a family of 8 people.
Why so low?
Primarily we mostly eat at home, clothes are not bought from the fanciest places, food is purchased in bulk or on special, and we have few additional outside activities. And we have no debt now the mortgage is gone. (The photo is from one of our trips to the market.)
If needed these expenses could be cut by one third pretty quickly.
Remember - the first step to changing anything is finding out where you are.