A budget is a plan on how you expect to spend and to save. As with all plans it takes careful consideration to ensure that you have included all items that are required and that what is being planned is real, that is it is practical and can be done. Most households have debt and to remove that debt you need to plan.

A budget is probably one of the most important processes you could undertake in managing your finances. The benefits of a budget is to avoid spending more than what you receive as income. It highlights where you money is being spent and helps to establish the baseline of what is mandatory expenditure and what is discretionary expenditure.

Discipline in sticking to a budget pays back a huge reward to you. You find that you are spending less, your debts are decreasing whilst savings are increasing and that you have more control of your life. The first thing you need to do in establishing a budget is to identify and record all income and all expenses. For expenses that are not regular each month, you can either expense their total over a 12 month period for a monthly budget or to record them as when they are expected to fall due.

Take a good hard analysis of what you think are mandatory expenses and discretionary. As an example the purchase of lunch every day at work is not mandatory, its discretionary as you could take your lunch to work, thereby saving a considerable amount of money each month. Remove all the non-discretionary and replace them with cheaper options, if required. Then you have established your baseline for your budget. Stick to the budget plan and reward yourself with little treats when you achieve your budget milestones.