Understanding where the money is going is a huge step towards getting it under control and moving towards your goals.
Tracking your spending by categories and looking back at old statements to create a history and see some trends is a good start. Before really trying to work towards FI I had already been utilizing a spread sheet to track spending so for many years making it was pretty easy. We now group our spending as follows.
Bills (monthly or others): We took a hard look at these and did everything we could to drive them down. This including switching mobile phone companies, getting rid of cable tv and just using internet services, reevaluating insurance (car, home, life).
Mortgages: We own a couple of rentals from not being in a position to sell when we were transferred to a new location. We track these pretty closely and watch the mortgage rates to see if a refinance is in our best interest. Right now all three of our properties have rates well below 3% so I don't think we will do much better than that.
Gas: We track this separately and do our best to consider when we drive and how we can get the most out of any trip when the car comes out of the garage.
Cash: Money in your wallet with just disappear so we try not to have it there. Trying to keep this number to zero each month is a good thing. If we do take cash out, it normally is for a specific purpose and we track it in another category.
Groceries: We hope this is our most expensive area each month and even then my wife is working on cutting costs here by changing up what we are eating to make it less expensive
Eating out: We count anytime money is spent on food or drink not to be consumed at home as this. On a good month, this category for us is close to zero. This month we had spent $10 in total until we met some friends from out of town out for drinks. We would have had them over to our house except they were staying about 30 minutes away and were seeing quite a few people while they were around and unable to get out to our side of town.
Merchandise: If it was purchased and an object is going to come into our house then it is falls here. Clothing, toys, furniture... this is normally pretty low. Any major purchase we talk about and shop around to make sure we are getting a good deal.
Other: This is where we spend money on either stuff we can't do ourselves or really doesn't fit in other groups. Dry cleaning for my work uniforms, money spent on swim lessons for the kids, dues for professional organizations....
We don't set specific limits on any group, but we always try to spend less in each group. Some are easier than others. As eating out goes down, then groceries will go up a little (a good thing). We also go over the spreadsheet a couple of times a month (ok, I bore my wife with this and she tolerates it) so we know where we are and how we are doing. This I think helps the most so we don't get to the end of the month and go "what the hell happened". We also look at the upcoming months/year to make sure we have a plan for expenses.