First, here are a few key terms that apply to a building a household budget:

Budget: Tool commonly used to measure expenses against income. A written plan that helps people manage their money.

Down payment: A portion of the price of a home, usually between three to 20 percent that is not borrowed and paid upfront in cash.

Fixed expense: Expenses due at a particular time or on a regular schedule. Fixed expense amounts remain the same or change according to a known schedule (for example, mortgage payments or rent, car payments, taxes and insurance).

Flexible expense: Expenses that occur by choice and are subject to change (for example, hobbies and entertainment).

Gross monthly income: Total amount of money earned in a month before any taxes and payroll deductions are subtracted.

Net monthly income: The amount of money you actually receive in your paycheck after taxes and any other deductions (such as health insurance, 401k contributions and Medicare) are subtracted from your paycheck; your take-home pay. If you are self-employed, the amount of your income after deducting estimated taxes and business expenses.

Variable expense: Expenses that take place on a regular basis and are consistent and predictable, but may vary in amount (for example, utilities and credit cards).