Smart money management isn’t simply about making more money, it’s about making the most of what you’ve got. If you’re serious about saving and getting ahead in 2010 you must have a budget and stick to it. It’ll show you where your money is going each month and help you use it in better ways.

Too many families just meander along with a bit of budget here, a quick decision on how to spend the odd bonus, an expensive holiday because you deserve it, and all of a sudden the credit cards are at their limit and they’re way off track.

Sit down and set your family budget for 2010. If you’ve done a budget before use this time to update it.

Step 1 - Get organised

Get together all your bank account and credit card statements, pay slips, big bills and any old budgets. Block out some time with your partner, when you won’t be interrupted, and clear the dining room table.

The easiest way to keep track of your budget and update it is to do it on the computer. If you want help with formatting you can download budget planners from most bank websites.

Step 2 - List your income

This is usually the easy bit. List all the money you receive each month; wages, pensions and Centrelink benefits, child support, investment income like rent or dividends… everything.

Total your income.

Step 3 - List your expenses

List all your essential expenses, the things that are unavoidable. I’m talking mortgage repayments, rent, loan and credit card repayments, transport, utilities, phone and internet, car rego, insurance premiums, and basic groceries. Now comes the tricky bit. How much are you spending on things that aren’t essential? Bought lunches, hair colouring, magazines, alcohol, cigarettes, dinners out, entertainment and so on. These expenses are usually harder to estimate because they may be irregular and you don’t have official bills filed away.

When you’re doing your budget you have to be ruthless and honest with yourself. If you over or under-estimate your expenses you’ll never be able to stick to your budget. Go through your bills and bank statements to get exact figures.

Total your expenses.

Step 4 - Balance your budget

Hopefully your income covers your expenses and you’re left with a little bit to save. Some family budgets may end up with a deficit. That doesn’t mean putting the shortfall on credit. Work out how to increase your income or decrease your expenses.

What can you live without while you get your finances under control and build some savings? Can you put off buying new clothes, eat in on date night, or go camping for your next holiday? When you’re at the supermarket look for cheaper home brand products, buy in bulk when you spot a good special and plan meals for the weekend so you don’t have to dial home delivery.

If you can’t balance your budget, earning more income can be just as good as cutting expenses. Can you volunteer for overtime or extra shifts at work, does your field allow you to do a bit of freelance work outside your regular job, what about getting a second job in the evenings or on the weekend? Look out for adds for everything from bar work to stacking shelves at the local supermarket.

Step 5 - Set savings targets

If we saved what was left at the end of each month we would have a tough battle. Decide how much you can afford to save each pay period and treat it like an expense in your budget, a bill that has to be paid.

My wife Libby and I take out a set amount at the start of the month when our wages are paid. Our monthly savings target is put away before we start spending and we are now use to getting by on the smaller salary.