Ask the Dollar Diva By Dorothy Rosen • Bankrate.com

A budget

Dear Dollar Diva,
What is a budget?

The deadly "B" word: Budget. Often euphemized as "Spending Plan" or "Cash-Flow Report," it conjures up the image of a wizened miser, pencil stub in hand, dropping numbers on a ledger sheet.

Grow up. An actual budget is simply the amounts that currently come in and go out; a projected budget is an expectation of future ins and outs.

Everybody who has money coming in and going out, has an actual budget; in most cases, it's just not in writing. And it's that "in writing" part that separates the financially savvy adult (FSA) from the clueless masses (CMs).

What kind of an image does an FSA conjure up? To the Diva he is a confident, generous human being who knows what he has, what he wants to have and how he's going to get it. The CMs, on the other hand, wander about the world, shrugging their wee shoulders as they ponder the mystery of making so much and having so little.

The written budget
A written budget is a piece of paper that has income and expense numbers on it. It's used by the FSA to keep him apprised of what comes in and what goes out each month. It works best when it's short, sweet and done on the computer.

The software that many FSAs use to keep track of their money is Microsoft's Money or Intuit's Quicken. Either program will give you a huge bang for your buck.

How do I start?
Take out your goal sheet (if you don't have one, start it now) and put this on the top of the list: "I will know how much comes in and how much goes out each month." This information is pivotal to your financial success: you cannot reach your financial goals without it.

The "estimate" budget
To have some fun with this, the Diva is going to walk you through an exercise, and then direct you to Bankrate.com's budgeting calculator so you can compare your numbers against the national averages. Before you start, print three copies of this page to use as worksheets for an estimated budget, an actual budget and a projected budget.

The income part is easy. Take a look at your most recent pay stub and fill in the income boxes.

Note: Monthly numbers are usually used in budgeting, however biweekly is used here to jibe with Bankrate.com calculator you'll be using later on.

Next, you're going to guess where your money goes; no peeking at checkbooks or credit card statements. Write your guesses in the "Amount" column.

Actual Budget
Go to your Money or Quicken reports for the numbers; if you haven't gone high-tech yet, compile the numbers from your checkbook and credit card statements. Don't strive for perfection. Round the numbers to the nearest 10, so it's easier to add them up.

By writing your actual budget down, you elevate yourself from the ranks of the Clueless Masses to the ranks of the Financially Savvy Adults.

Projected Budget
You know where you are; now think about where you want to be. Record your target numbers on an expense sheet and jot a note next to each item indicating how you intend to reach your goal.

Let's say you want to cut your food expense by 10 percent; eating in more will help you get there. Get some saving ideas by reading Bankrate.com's "Cheap eats" and "Once-a-month cooking saves cash."

There are many inexpensive books on the market to help you track your money, such as Judy Lawrence's The Budget Kit. The sooner you embrace the concept, the sooner you'll be on the road to a rich life.

DOROTHY ROSEN has a master's degree in finance, with a specialization in accounting, from the Kellogg Graduate School at Northwestern University in Evanston, Ill. Rosen has more than 15 years of experience in the financial arena, serving in Illinois and Florida as a certified public accountant, financial consultant, expert witness and educator. She is owner of Dorothy Rosen, CPA, a public accounting firm that serves individuals and small businesses.