The Internet and personal-finance software programs have taken much of the drudgery (and pain) out of setting up a budget. In general, follow these steps to setting up a budget (see Book I's Chapter 3 for another method - you can also use the budget you create in that chapter to get you started here):

1. List your income and expenses.

Everyone needs to start somewhere. List your income and expenses to determine how well you're doing. I list several online net cash flow cal- culators later in this section so you can gain a quick view of your start- ing point.

2. Determine the time frame of your budget.

Decide on the time period for your budget. If you're paid every two weeks, a two-week budget may work for you. If you pay bills monthly, a monthly budget may be more to your liking. Most people find an annual or semiannual budget (based on real estate taxes and fees for annual insurance premiums) difficult to work with. No hard-and-fast rules dic- tate which time period is best.

3. Choose a simple tracking technique.

You may want to track your expenses in a notebook or use a personal finance software program like Quicken (www·quicken·com) or MS Money (www·microsoft·com/money/)· Tracking your expenses online at www·quicken·com and downloading them to a spreadsheet applica- tion program may be easier for you. Choose the tracking method that is the most comfortable for you to use.

4. Determine general categories.

You may want to start with categories such as housing, car, and food, and then add subcategories like house payment and home improvements car payment and auto insurance, and groceries and dining out. You can always add categories you need or delete ones you don't use.

5. Establish income and spending amounts.

Tally your income and deduct your expenses to find out whether you've been overspending, and then compare your spending habits to the aver- ages for others with a similar net income at www·msfinancialsavvy· com/calculators/cash_flow·php . In what areas are you overspend- ing or underspending?