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Budget. For most of us, it's as appealing as a root canal. But a budget doesn't have to be painful. In fact, it can save you untold pain and misery.

If you're not one of those thrifty souls who squirrel away cash for a rainy day, chances are you're living beyond your means. No matter how much your income grows, there never seems to be enough money. Sound familiar? The good news is, budgets are flexible. As long as you keep within certain percentages, you can decide where your money goes.

First, calculate your after-tax monthly income. This is how much you have to spend. Now allocate roughly the following:

35% for housing
15% for transportation
15% for debt repayment
10% for savings
25% for everything else

These numbers are a guideline, but they're not set in stone. Let's say you live downtown. If you use public transportation, you could use some of your transportation budget for other categories. For instance if you own your own home, you could use the money to pay down your mortgage sooner. Even though a mortgage is considered "good debt," paying it down is a great idea.

Chances are you have credit card debt, and maybe some loans. The 15% for debt repayment should cover the cost to pay off your minimum balance and then some. Ideally you want to pay at least double the minimum due every month. Otherwise you'll be paying off interest for decades to come. If however, you're lucky enough to have little or no debt, you could use the extra money to boost your savings, or for miscellaneous expenses. It's up to you.

25% may seem like very little for food, clothing, vacations and other items, especially if you have children. The fact is, we've become accustomed to living on borrowed money; money that's costing us a fortune in interest. It may not be easy to live on a budget, but it's something people did for generations, and they still managed to prosper. In fact, ours is the most debt-burdened society in history.

Maybe the most important reason to budget, is to build up savings. Without a plan, it's easy to spend every penny you earn and more, with nothing to show for it. But putting aside a certain percentage for savings not only looks good on a balance sheet, it feels good too.

For more tips on how to create a budget, check out Oprah's Debt Diet at oprah.com, or visit moneysavingexpert.com.

Learn more about this author, Sophie London.
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