First, you must know where you are. That means calculating your income and expenses over a period of time. You'll need to use a long enough span to include the unpredictables that happen to a budget. There are income and expense tracking plans available in your library or you can create your own. The simplest method is to take a loose-leaf notebook. Use one page for income. Use a different page for expenses by type. When you get right down to it, all you really need to know is how much you make, how much you spend and where does it go.

Next, you'll need to decide what you want to accomplish and what that means in dollars and cents. If you want to save some money, decide how much. Five percent of your income? Before or after taxes? How much is that each month? Each pay period? You get the idea.

If you want a parent to stay home while the kids are small your challenge is a bit more difficult. Naturally, you'll need to figure how much income will be lost. But you'll also need to calculate how much you'll save in reduced income taxes and social security taxes. You're almost certain to have other savings, too. Consider everything. You may save on transportation, lunches, clothing. Even money you don't spend in office pools or for birthday gifts will affect your expenses.

Once you have some ideas to work with you'll need to come up with a 'what if' budget. This is where you'll get an idea if your plans will work. Put together a listing of income and expenses with the changes that you're considering. Then take a look at the data. Suppose you did quit your job. When you subtract the income lost and expenses that are reduced does your budget balance? What you're doing here is deciding if the end outcome is acceptable to you.

Chances are that you'll need to make further adjustments to your plan. Perhaps you tried to cut spending in an area to leave some money for savings. But once you really look at the plan you realize that you won't be able to keep spending to that lower target. What's the answer? You'll either need to make other adjustments to your spending or find a way to increase income.

Let's suppose you put together a plan and it doesn't balance. There's not enough income to cover the outgo. What then? You'll need to replan. The beauty here is that you're not going to put your time and energy into executing a plan that won't get you where you want to go. Cutting your clothing budget may be an admirable goal. But if it doesn't provide enough money to stay current on your mortgage, you're still not getting the job done. Some simple pencil and paper exercises can spare you that problem.

Most people have trouble cutting expenses. There are very few of us who instinctively like to 'go without'. So how do you find savings in your budget. Just where does one start? Take a lesson from the bank robber who was asked why he robs banks. His response...because that's where the money is.

No, I don't want you to become bank robbers! But you need to consider how much you're spending when you want to cut expenses. If you don't own a car and are using your bike and buses you probably won't be able to cut your transportation budget by $2,000. In fact, if you're goal is to save that much money you'll either need to do something dramatic in one area or plan on getting part of the money from a couple of different expenses categories.

Be realistic. You can find a few dollars in a number of different areas. But if you need big savings you'll need to focus on the areas where you spend the most.