The top 10 things to know about making a budget.

1. Budgets are necessary.

* It is the only way that you can really get a grip on your spending so you can make sure your money is being used the way you want it to be.

2. Designing your budget requires 3 initial steps…

* You have to categorize how you spend your money now.

* Evaluate your current spending and set goals that take into account your financial objectives.

* Track your spending to make sure that it stays within the guidelines of your objectives.

3. Use software to save you some grief!

* I use Quicken personally or you can use Microsoft Money – they can help not only build your budget but very effective in tracking too.

4. Don’t over complicate it and drive yourself into not doing it!

* Set basic categories – don’t get into the micro detail. Once you establish which categories of spending that you want to use then you can concentrate on those categories – expanding on where you need to cut or expand as you go and less about other aspects of your spending.

5. Watch out for cash leakage.

* If you withdraw cash from the ATM and it just seems to disappear – then you have to keep better records… I am all for using cash – but make sure you know what you are using it for and keep good records.

6. Spending beyond your limits can be dangerous.

* Statistics show that many households are spending more than they bring in. This is a slippery slope and usually credit cards are involved.

7. Beware of luxuries dressed up as necessities.

* Simply – if your income does not cover your costs – then some of your spending is probably for luxuries – even if you think they are filling a real need.

8. Contribute to yourself.

* If you really aim for 90% of your income to live on and spend, then you can use the other 10% to save for your big picture goals and dreams.

9. Don’t count on windfalls.

* When calculating the money you can live on – or for your future planning – don’t include dollars that you are not sure you will receive – like an inheritance, year end bonus – tax refund – investment gains – or as some throw money away each month to ‘lotteries’!

10. Beware of the spending creep…

* When your income starts to rise from raises – promotions – smart investing… don’t start spending it on luxuries until you have made it part of your overall plan and goals. Better to save it first.