The text books recommend that you record your expenditure for four to six months before creating your budget to get an accurate picture of your individual expenses. A less complicated method is to budget on the basis of your past records of expenses (you can always make minor adjustments later). Step 1: List all your expenses - what you spend in each category each month - on the basis of your historical records. Also list your monthly income.

Step 2: Take an overall look at your savings and investments. Are you saving enough to achieve your long-term goals (a comfortable retirement), your medium-term goals (a holiday overseas, children's university fees) and your short-term goals (repaying credit card debt)?

Hard as it may be, aim to save 10-15% of your income each month (this includes your pension and other retirement fund contributions). Break your savings goals into monthly amounts - you may not be able to afford to finance all your goals right now, so you'll have to prioritise. Step 3: Work out your spending limits for each expense category. In other words, determine what you should spend in any given month. In order to achieve your savings goals, you may have to trim some of your expenses.

Be realistic when setting expense limits - a figure that is too low will result in a feeling of deprivation (and that leads to failure, as seasoned dieters know).

There are a couple of common benchmarks to guide you in determining the "reasonableness" of your expense limits: rent or bond repayments should be no more than 30% of your total monthly expenditure; entertainment costs should be less than 10% of your total expenses; your car lease or loan repayment should be no more than 20% of your gross income.

Remember, you'll have to build some provisions (to cater for future unknown expenses) into your monthly budget. You'll need provisions for car maintenance, holidays and a general provision to cover home maintenance, emergency and extraordinary costs. As your general provision covers a wide range of contingencies, you'll need to build up a fairly substantial amount (if you already have an emergency cash fund, this can be included in your provision).

A vexing area in budgeting dealing with the numerous ATM cash withdrawals each month. One seasoned budgeter records, in his pocket expense book, how each and every cent is spent. Great, if you're that way inclined. But an easier way is to give yourself a weekly cash limit to cater for sundry expenses like magazines, bread, milk, chocolate etcetera. This requires self-discipline because once your weekly allowance is used up you must not withdraw any more cash or you'll be back to square one. Step 4: At the end of each month compare your actual expenses to your budget. Ascertain why you overspent in certain areas and take corrective action (which could range from eating more home-cooked fare to cutting up your credit card). You can make adjustments to your budget but don't be too generous as you'll defeat its purpose.

If, at the end of the month, you are within your budget, the surplus will make up for a shortfall in another month.

Keeping simple but detailed records of your actual expenses is essential to a workable budget. Whether you input your figures into a computer or write them down, the key is get into a regular habit. I know a financial adviser who dutifully records his expenses at the end of each day! For lesser mortals the end of each week will do.

Here are more practical tips from seasoned budgeters and financial advisers:

A credit card is cheap to use, provided you pay the full amount by the due date each month (otherwise you'll be charged interest on the whole bill, rather than on the unpaid portion). It's cheaper to deposit a cheque via an ATM, than with a bank teller. Making ATM cash withdrawals is expensive - it costs you less to make fewer withdrawals each month, and where possible, use the ATM of your own bank to save the extra fee.

The accompanying table is Business Times Money's suggested monthly personal budget. There is space to record each month's expenses - a useful tool which highlights an expense which breaks the trend.

The most important thing in budgeting is sticking to it!

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