Last week I had you take a really honest look at your bank account and identify how much money you were actually spending on FAT a.k.a luxury items.

I know looking at that number can be shocking and disgusting. Believe me, when I realized I was spending $30-$50 just on coffee a month, I was in awe.  I was making all those companies richer while my bank account was getting poorer.

Our moms and dad went without all the fancy coffee shops we have today and other conveniences.  It still amazes me how my parents were able to save up so much while raising 3 kids even though they made very little.  Its because they only stuck to buying what was needed and only bought what they could afford.

So now that you know how much you actually need to pay for necessities and you know how much extra money you have left over, you need to create a budget or a plan for where your money is going to go each month.

Start buy listing out all your set bills. Next come up with a realistic budget for groceries ($20 per person/wk should be more than enough) gas and fun money.

A little tip, if you have A LOT of debt to pay off.  You really need to prioritize and make some short term sacrifices to pay off those debts over the next few years.  That means no vacations or eating out every night of the week.   However, if you think it would be easier to stick with long term if you budgeted in a few fun things IN CASH then do it.

They key here is to just come up with a plan a set amount of money you can spend each month or week and STICK TO IT.  Once the money you budgeted for whatever item is gone, its gone.

Next week we will talk about emergency funds to stop you from using credit cards as your scape goat and putting yourself into further financial ruin.

Before you go, I want to know if you have ever created a budget in the past and how its worked for you.