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In simple terms, a budget reflects what happens to the money you bring in when you subtract payments on long-term debt, short term debt, the costs of living, working, playing and maintaining a place to live. Some feel a budget gives them control over their resources. Others feel they relinquish control to their budget. Like most things in life, living within a budget that you develop comes down to a matter of attitude - yours. Even if numbers 'aren't your thing' or you can't imagine putting a structure around how you spend your money, an effective budget can be created one step at a time.

1. BUDGET GOALS

What is your reason for setting up a budget?
- To get out of debt?
- To identify money for large purchases, travel, savings?
- To eliminate overdue fees and interest?
- To monitor you're spending?
- To assist with financial decisions?
- To project personal, social and financial choices?

Whatever your reasons or goals are for establishing a budget, you need to clearly articulate them - and review whenever you are tempted to abandon your plan. A budget is, after all, your basic financial plan.

2. Create a Baseline

It is important to itemize your current situation for two reasons.

- For a budget to succeed, you need to list and quantify everything financial. Unplanned expenditures, unaccounted for interest payments, hidden costs associated with financial or commercial transactions are 'surprises' that could easily sabotage your budget.

- As you begin to implement your budget, you can use your baseline to measure your progress and help to keep you on track.

3. Identify Income

Begin the budget process by listing all sources of regular after tax income - from employment, commissions, royalties, investments, pensions, etc. You will want to work with Net Income as that is the money you have at your disposal. This is a good time to ensure that sufficient taxes are being deducted at source or that you have established a monthly deposit to protect yourself from unplanned income taxes at the end of the year.

4. Identify Liabilities and Debts

List the totals of long term and short term mortgages and loans together with the amount of monthly payments. Depending on how your income is structured, you might want to check with your financial institution to investigate the benefits of increasing mortgage (and some loan) payments to bi-weekly rather than monthly. This may significantly reduce the term of your mortgage without increasing the amount of your payment. In most years there are two

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