Why Budget?

• Budgeting gives an accurate picture of your financial position. It will almost certainly demonstrate that money is not being spent according to the priorities and will highlight where changes in spending habits can be made and, possibly, where savings can be made.

• Budgeting also helps make money go further. The fundamental aim of Budgeting is to ensure that basic needs are met and that, where necessary, steps are taken to get you out of debt.

• A budget can be a very effective brake on large impulse spending.

• Budgeting can help prevent the running up of debts to the point where contractual payments can no longer be maintained.

• It will help to reduce stress levels.

Evaluate your standard of living. Advertisers are constantly telling us that, as consumers, we should happily gratify ourselves today with no thought of tomorrow. Following this route exposes you to enormous risks, particularly if you use credit to finance your standard of living.

As millions of people have eventually found out to their cost, there are no longer many, if any, guaranteed jobs for life. When evaluating how you live you need to think about what you would do if your circumstances changed dramatically.

Develop some form of cushion to help cope with a negative change in circumstances rather than spending to the limit.

Set out your financial goals - these may include such things as a pension, savings accounts for the children, etcetera. Then prioritise these and try to establish how long it will take to reach these goals. Bear in mind that all your goals will not be achievable immediately, but you may need to start planning for them now.

If you feel your situation is spiralling out of control, start to buy everything on a cash basis.

When you are thinking of buying something that is non-essential ask yourself whether it is something you or your family really need or whether it is something you just want.

Don't be afraid to haggle over prices, especially if you are paying cash. A cash customer is in a much stronger position to bargain than a credit customer.

25 Ways to Cut Costs

Save a little here; save a little there. It all adds up to real money.

Think you know everything there is to know about saving money? Bet you didn't know about the Amish mail-order catalog that practically charges thrift store prices for brand new clothes. Or about how to take a luxury cruise for just $28 a day. Read on to save a bundle.

Sweat For Less. One way to get in shape cheap: Sign up for a class at a local community college (as little as $35 a semester). Then, use your ID to work out at the gym. Save $255 on the typical annual cost of a gym membership.

Tee Off. Like golf? Buy clubs, shoes, and other gear for 20 percent less than retail at www.golfdiscount.com (call 888-394-4653), says Elizabeth Cline, author of The Bargain Buyer's Guide.

Blow Cold. A solar attic fan (about $375) pushes hot air out of your attic, cutting the work required of your air conditioner and typically trimming your electric bills by about $100 a summer.

Fly Right. Take a working vacation with Volunteers for Peace (802-259-2759; www.vfp.org). The full cost (excluding transportation overseas): about $200 per two-to-three-week program. A bonus: It's tax-deductible.

Dress Amish. For simple, sturdy clothes, check out Gohn Brothers, which caters mainly to the Amish but sells to anyone. You'll usually save one-third off retail prices. Get a pair of denim pants for $21 (that's at least $10 right there). For catalog, send $1 to P.O. Box 1110, Middlebury, IN 46540.

Slow Down. What's the rush? Driving 55 mph burns 15 percent less gas per mile than driving 65. The typical driver can save $135 a year this way.

Follow The Sun. A solar roof panel might cost $2,500 or more to buy and install, but it can cut your annual water-heating bills by about $400. Find a contractor through the Solar Energy Industries Association (202-628-7745; www.seia.org).

Wear It Well. Find beautiful clothes in consignment shops—but not just any consignment shops. "Go to the shops closest to the richest neighborhoods," suggest Ken and Daria Dolan, who host the syndicated radio show The Dolans. Snag a $250 designer dress for $70.

Sail Away. If you're a single man, 45 to 72, a hot dancer, and the owner of a suitable wardrobe, the Gentlemen Host Program (708-301-7535) may put you on a cruise for just $28 a day.

Cut A Deal. The Video Learning Library (800-383-8811; www.videolearning.com) stocks 20,000 how-to videos to rent or buy. One we like: "Haircutting at Home." Tape rentals: just $8 for two weeks, plus $10 for roundtrip shipping. Save $72 a year on haircuts alone this way.

Become A Writer. Always jot down a list before heading to the supermarket. Then stick to it. You'll avoid such costly and frivolous items as premade caramel apple "wrap" and instant bacon. You can save hundreds over the course of a year.

Pack It In. Traveling overseas? Sell your baggage space to a courier company to save up to 85 percent on your next flight. For information on reputable companies, contact the International Association of Air Travel Couriers (308-632-3273; www.courier.org).

Bank Better. Want the lowest-cost mortgage, the lowest-interest credit card, or the highest rates on CDs? Visit www.bankrate.com. Plug in your desired deal, and see what pops up. One recent example: a Mastercard with a 4.25 percent interest rate.

Take A Seat. Season tickets at The Austin (Texas) Symphony cost up to $275, but thrifty music lovers get in free by serving as ushers. Many concert halls and theaters across the nation do the same. Call your local theater to find out if it needs help. Or search the Internet, using the keywords "volunteer," "usher," plus your hometown.

Bundle Up. If possible, insure your car and your home with the same firm. Buying insurance in bulk has two benefits. First, you'll save money. Second, if you have an accident, you're less likely to get dropped, since your insurer wants to keep all your business. Trim up to 15 percent off combined annual auto and home insurance.

Get Well. Having trouble paying for medications? Contact the Pharmaceutical Research and Manufacturers of America (800-762-4636; www.phrma.org) for its free "Directory of Prescription Drug Patient Assistance Programs." Income restrictions apply. Save $1,050 on a year's supply of Vioxx.

Add Some Spice. Seasonings usually come in packages that are tiny. Buy them in one-pound bags from the Atlantic Spice Co. (800-316-7965; www.atlanticspice.com) to save up to 90 percent off list. Minimum order: $30.

Ditch The Fir. Must your next Christmas tree be fresh-cut? Pick a large houseplant—a ficus, say—and decorate it just like a spruce. Put $35 in your stocking.

Beat The Crowds. Always shop for holiday cards, decorations, and gift wrap as the season ends, and keep them for next year. Save 75 percent or more. (Just don't forget where you stored them.)

Score Points. Go shopping during major sporting events like the World Series or Super Bowl Sunday. Stores are empty, and salespeople are eager to dicker. Knock at least 2 percent off list price.

Call Late. The best airline fares typically go to those who call just after midnight, East Coast time. That's when airlines decide whether a flight is full and begin slashing prices if it's not. Fares can drop by anywhere from $50 to $400.

Move In. Considering a new home? The best time to buy is in the dead of winter, when other buyers huddle inside. (Likewise, in the Sunbelt, wait until summer's dog days.) You can save 5 percent off the peak-season price.

Check It Out. Your bank may charge up to $20 for a box of replacement checks. Use independent printers instead. Checks Unlimited (800-426-0822; www.checksunlimited.com), for one, charges as little as $8.95. Or try Checks in the Mail (800-733-4443; www.checksinthemail.com).

See Double. Share three magazine subscriptions with a like-minded friend to save at least $20.

Trim The Fat. Once a year, put all your finances under a microscope. A prime cost-cutting target: unnecessary insurance. For instance, you may be able to drop the credit-life insurance that is often buried in the contracts for cars, major appliances, or mortgage loans. Sure, doing this might save you as little as $4 monthly, but you'll reap a bigger benefit: that special sense of satisfaction that you get from dumping something you don't need.

Direct Billing

I always see tips for paying bills that tell you to put all your bills in one place and pay them all on one day, and similar ideas. But no matter how hard I tried I always seemed to forget the day or the place, or they came at the wrong time, or were due before our pay went in, or were larger than anticipated.

Since I couldn't afford an accountant, I thought I would see how much of the bill paying work could be done by the companies and my bank, instead of me!

1. Almost all our bills were able to be put on an equal payment plan. It helped that we had been keeping our payments current. This meant that we were able to budget the same amount every month for electricity, gas, water, cable, and internet.

2. Every company I called was willing to move the payment date to one that I knew would correspond to our pay deposits.

3. As a back-up, I spoke to the bank and arranged to get overdraft protection on the account our pay went into and all the bills came out of. No more horrendous overdraft charges!!

4. Every company I called was willing to take the payment directly from our account. This cut out the cost of stamps, envelopes and checks, and I still got a paper copy to let me know when they were coming out and the amount. As soon as I got that, I would mark it on the calendar to keep track. As a result, I can rest assured that our bills will always get paid on time, every month, and never have an overdue or NSF payment. Even if I am off sick or on holidays, they are taken care of.