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change as you go through the process. Since you’ve already added up what your minimum payments must be to keep your credit history from getting bruised, drop that number into the budget.

Next put in your income. Enter the amount you’ve been putting into the bank every month. (You figured this out when you did your spending analysis in Chapter 1. If you skipped this step before, you have to do it now!) This number has to be what’s actually been going into your account, not what you imagine has been going in. If you’ve fallen into the trap of thinking of your income in gross dollars (before taxes), it’s time to stop that nonsense. Your gross income is yours and the government’s income. If you want a budget that works, you have to work with your net income: your income after deductions.

You only have so much money to spend. Up until now, you may have been unwilling to accept that you only have so much money to spend, so you used credit cards, lines of credit, and whatever other forms of financing you could get your hands on to keep shopping. But the reality is … say it with me … you only have so much money to spend.

Once you enter all the averages you came up with the Spending Analysis Worksheet into your budget, if you can’t make it balance—if the number at the bottom isn’t a positive or a zero—you have a problem. You’ve been spending more money than you make for one of two reasons:

1. Your expenses are too high.

2. Your income is too low.

Or maybe it’s a combination of both. You need to assess what the problem is so you can fix it.

People think there’s some mystery involved in balancing a budget. There isn’t. It’s simply a matter of taking what you have and divvying it up in a way that works for you. And if you can’t afford cable, you can’t afford cable.

GAIL’S TIPS

Some people are more concrete thinkers than others, and working with a budget on paper feels too abstract to be real. They need to actually see the piles of money to see when the piles of money run out. If you’re one of these people, here’s what I suggest you do:

1.Get yourself a stash of play money. You can print these up on the computer yourself or you can simply raid your kids’ games for the “money” you’ll need. Find an amount in a mix of denominations that matches what you earn every month. This is your “income.”

2.As you work through your budget, take the money out of your “income” and set it aside with a note that says what category it’s going into. So if you’re planning to spend $550 a month on Groceries and Personal Care, write $550 on your Budget Worksheet. Then take $550 out of your pile of money and label it “Groceries and Personal Care” and set it aside.

3.Work through every category of your budget like this until the money runs out.

4. If you have categories with no money, you’ll have to decide if you’re going to eliminate those categories from your budget or take money from the other piles to put something into those piles.

CUTTING EXPENSES

Some things are very important, some things are a little important, and some things aren’t important at all. This is when you figure out for yourself which is which.

You have to pay to keep a roof over your head, so rent, mortgage, property taxes, and utilities are all essential expenses. They are “need to have” expenses. Food is an essential expense since you have to eat. But steak is a “nice to have” when it comes to how much you’re going to allocate for food. If you can afford steak, you can eat steak. If you can’t, you’ll be looking for a cheaper way to fill your belly by focusing only on what you “need to have.” While food is an essential expense, how much you spend on food is “variable” (it can change) depending on your resources.

When you’re trimming expenses, the first thing to do is to significantly reduce or completely eliminate anything that isn’t an essential expense: everything that’s a “nice to have.” If after balancing your budget and taking care of all the “need to have” items you find you have some money left, you can always add a “nice to have” back into your budget.

Grab a pencil and start chopping. Cut out everything that isn’t an essential expense. Chop your communications costs: cable, landlines, cell phones, Internet. Eliminate money in the Clothing category, the Entertainment category, the Vacation category. Salon trips and massages are gone. The gym is gone. Restaurants and takeout … gone!

If when you add up the numbers your budget still doesn’t balance, you’ll have to look at ways to trim some of those essential expenses, eliminating the “nice to have” and focusing only on the “need to have.” Turn down your thermostat and put on a sweater to save on heating costs. Get rid of the car you simply can’t afford and carpool instead. Find a cheaper place to live. Do whatever it takes to get the budget to balance.

It’s amazing just how little people can live on when they become conscious of what they are spending. My families routinely have to learn to live on less. I’ve cut their variable expenses by 50%, 65%, or 85% and they manage. In fact, I haven’t worked with a single family to date that hasn’t had money left in the Magic Jars at the end of my time with them. You can live on less if you’re determined to change your circumstances.

Of course, determination is a big thing. If you’re at all wishy-washy about what it’ll take to set your money and your life straight, if you just can’t work up the guts to do things differently, it won’t be the budget that failed.

Sometimes no matter how much you cut, there’s