There is not a right way to budget. There are many different methods. The most important thing is that you have a budget. Here are some possible ways to budget:
Use a computer program - There are several commercially available budgeting programs that can hold your hand through the process of creating a budget. Quicken & Money seem to both have the weakness that budgeting seems to happen after you've spent your money. Unless you're creative it is also difficult to carry money over in different categories from month to month.
Use a spreadsheet - I've never done this. But it's the method that many use in order to easily carry overage amounts from month to month.
Use a notebook - This is the method modeled by my parents. It is essentially like using a spreadsheet, but you are doing all the calculations. No need for computer skills with this method.
Use cash & envelopes - Distribute budgeted amounts of cash into category envelopes. You can determine how much money is available throughout the month by counting what is left in the envelope. This method is tricky for those who use bill pay, don't like having a lot of cash on hand or enjoy earning rewards on an always-paid credit card. There are computer programs that mimic this concept, but do it virtually (and reduce the disadvantages listed above). I am currently researching these programs.