Make 2010 the year you take control of your cash, by drawing up a budget.

Did you know that every Australian adult owes an average of $74,000 right now? The first step in taking control of your finances (both your debt and your savings), is knowing where your money goes. The best way to do that, is to create a budget.

Budgeting can sound boring and seem like an extra chore however anything that shows how much you have available to spend or save at any given time is definitely not boring! An hour or so of work now can save time, money and stress later.

• Time: because you are not having to apply for loans to cover unforeseen expenses
• Money: because any late payments cost you
• Stress: because you will know when expenses are due and be better prepared to meet them

A budget is an estimate of your expected income and expenses for the year ahead. In order to draw up a budget, you need to know what you currently earn and spend. Once all the figures are laid out, you can see where potential savings can be made and you can set yourself achievable financial goals.

On paper or in a spreadsheet, create three columns: the first is for a description of the income or expense, the second column is to list money coming in and the last column is to list money going out.

Now, consider all the money you expect to earn and expect to pay over a year.

In terms of income, that could be your proposed earnings from Tupperware, a partner’s salary, income from a rental property, and any government payments you may be entitled to.

Expenses may include your mortgage or rent, school fees, child care, health insurance, groceries, electricity, gas, water, and car expenses. Don't forget to include any annual costs, such as rates. You also need to factor in clothing, entertainment, home maintenance, birthday and Christmas gifts, and pet care.

If you’re not sure how much you spend on different categories, go through a couple of months’ bank statements to get a rough indication of your monthly expenditure.

Add up all your income, then add up all your expenses and compare the two figures.

If your income is greater than your expenses, congratulations! You're in a good position to save towards financial goals that may range from a down payment on a home, to a family holiday.

If your expenses exceed your income, now’s the time to see where you can trim your spending or increase your income. Many people find that entertainment, clothing and groceries are good areas to target, so set yourself a realistic challenge to cut down on spending in these areas first. For instance, you might want to try shopping at a cheaper supermarket (according to consumer advocacy group Choice, Aldi is consistently the cheapest store), using shopping lists to limit food wastage (an area where Tupperware can also really help you!), or commit to eating out or going to the movies once a month rather than every week.

If trimming your spending sounds too unsavoury to contemplate, as a Tupperware Demonstrator you are in a very fortunate position. Unlike many people, you have every opportunity to increase your income simply by holding additional parties each week. Additionally, consider stepping up to Managership to see a real shift in your income for just a few extra responsibilities.

If you have a lot of debt, it may help to make an appointment with a financial adviser. They can help you make a plan to steadily reduce your debt and get your finances back on track.

Once you have your annual income and expenditure worked out, break it down further. You’ll see that some expenses do not occur evenly (e.g. rates and school fees often come in January or February). Work out when these fluctuations in expenses occur, then plan for it by saving (accruing) a little extra each week/month leading up to the expense. Or pack your diary with extra parties to ensure you'll have it covered when the bill arrives.

Good debt versus bad debt

Experts distinguish between good debt – the kind that will ultimately build wealth – and bad debt, where the item you buy depreciates in value and you're basically waving goodbye to your money. Good debt includes your mortgage, student loans and business loans. Bad debt often involves high-interest credit cards, including store cards.

Web resources

Visit www.understandingmoney.gov.au or for online and printable budgets. Most of the banks also offer an online budget planner.

Budgeting pitfalls

Financial adviser Zuraida Ariffin says: “A big challenge to people’s budgets is change. For instance, if you’re a two-income household and one partner stops working to have a child or because of a job loss, people who are used to a certain lifestyle may find it hard to trim their spending in line with their new parameters.

“Another common difficulty is unforeseen expenses, where you may have just gone out and bought that new washing machine, only to receive the bill for your year’s rego. Suddenly you're trying to find an extra $1200 and you use a credit card. That kind of debt can add up.”

The key to avoiding these common pitfalls is to reassess your budget when your circumstances change and make sure you factor in annual costs when you draw up your budget. It’s also ideal to have a modest savings cushion for unforeseen expenses.

Zuraida has her own business in Canberra. The Financial Planning Association of Australia has around 12,000 registered members. To find a financial planner, visit www.goodadvice.com.au or call 1300 626 393.