Once you have written up your financial goals, you need to work out the budget: the day-to-day plan that will ensure you get to your destination.

Budget blues
Most people start by making a list of all their expenses and then their income. Usually expenses exceed income so they go back to the list and start shaving zeros off more flexible expenditure such as entertainment and clothing. The savings plan is usually the first casualty of a stressed budget.

A budget is more than just listing your commitments; it should be a tool to help you get more out of your available resources. Therefore we should rather call it a spending plan; this implies that there is a goal to everything you spend your money on, including saving and debt elimination. In other words it implies increased possibilities rather than limitations.

The reason people can't stick to a budget is because they don't make provision for getting out of debt as most budgets keep the status quo. A spending plan will progressively free up cash flow and help you to build wealth.

Design your spending plan
1. The key to a successful plan is to recognise that your main focus should be to eliminate debt. In order to do this you can start with as little as R200. If you feel that there is no way you can find this in your budget, you'll need to become a little more creative. Think about luxury items that you buy each week that (maybe) you can do without. It could be a tub of premium ice cream, a few packs of cigarettes, or a daily run to a fast-food joint.

2. Make a list of all your short-term debt starting with the smallest payment to the largest one. Take that R200 that you have found and start paying off the smallest debt first. Then when that debt is paid (let's say it was a R100 per month pharmacy account over six months) add that instalment to the R200 and tackle the next smallest debt. Keep doing this and you will soon realise the awesome power of the "snowball effect". The Spending Plan below illustrates how this can be achieved.

3. By systematically eliminating your debt you can end next year with R1 500 per month extra in your pocket. If you kept on rolling over your debt you could also quickly eliminate your car payment and then your bond payment. In addition you could start a good investment plan.

4. Model your plan on this spending plan. When you do your own plan, itemise under these headings to understand how much you spend on the different items each month. This will help you to find the "money suckers" and divert as much as possible to your debt elimination plan.

5. You'll notice that savings is not included in the plan. If you are earning a rate of 10% on your investments but spending 20% on your debt you're moving backwards. The exception to this is your Retirement Annuity; if you've already started one, keep paying it. The only time that you should put retirement savings on hold is if you are so deep in debt that your house or car is in jeopardy.

So basically, pay off your smallest debt first, then roll that into the payments on your next smallest debt. This creates a snowball effect that is extremely powerful. By the end of year one you will be amazed at how much debt has been cleared.

While working on this plan we recommend that you discontinue using your credit card and store cards. You may have to forego a few steak dinners for the first two months but the sacrifice is more than worth it. After you have cleared your short-term debt you can use this method to pay off your long-term debt, such as your car or bond. People have been lead to believe that they must finance their homes over 20 years. Most of us opt for this because the payments are lower. However, if we had no other commitments in terms of debt we could conceivably pay off a home in five years. Not only would we then live rent-free, we would save a fortune in interest charges.

If you have access to the Internet, search on Google using the key phrase "ways to budget". There are hundreds of good websites with great ideas and one of them may be just the thing you need to get you started on your road to financial success.