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where your money is going then carry a notepad with you for the next month. Write down every payment that you make. The more detail you record, the better.

Make a list of everything that you spend and pay on a monthly basis. Include everything!

Total your monthly expenditure items to get a grand total.
List your total household income in a separate column. Compare the total of this to your total expenditure.

STEP 3: SCRUTINISE YOUR SPENDING PATTERN

Involve the entire household in reviewing the budget. Review each item. Ignore fixed costs for now. Identify any spending that you could easily do without.

Look for luxuries or spending that can be cut. Use the detailed list that you created over the past month. Keep reviewing the budget to see if there are any areas where spending can be reduced.

If you cannot reduce your spending plan this way, then look at your debt and investment portfolio.

It may be prudent to suspend monthly investments for now. Once you are debt free, there will be much more available for investment. Don't stop life insurance premiums or retirement contributions unless this can be done without penalties.

Finally, look at your debts. Make arrangements with the bank to pay interest only on your mortgage (and perhaps on other longer term debt) for the next few months. Try to negotiate a lower rate of interest on your credit card, home-loan and overdraft.

STEP 4: CREATE A NEW SPENDING PLAN

We will call your new budget a spending plan. There should now be a surplus of income over expenditure. If there is no surplus, then repeat the previous steps. Perhaps look at ways to earn extra income.

STEP 5: THE DEBT ELIMINATION ACTION PLAN

The action plan involves targeting your debts one at a time. Go back to your list of debts. The usual advice is to target the debt with the highest rate of interest. It is more effective to target the smallest debt first. The reason for this is to free-up funds as quickly as possible to pay off more debt more quickly.

Take the debt with the shortest remaining term. Add the surplus that you created in Step 4 to the normal repayment. Pay the additional amount each month until the debt is paid.

The total enhanced repayment of the first debt has been freed. Once again select the debt with the shortest remaining term. Add the freed-up funds from the paid-up debt to the normal repayment. You will be able to pay off this debt much more quickly!

Each time a debt is repaid, more funds become available. Repeat the process until you should have

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