Budgets are essential for financial planning. Managing your financial life without one is like driving into your future blindfolded. You have no idea about where you are now, where you’ll be later, nor the financial distance between those two points. And there may be some serious impacts along the way.

Personal budgets should be both realistic and aspirational. First, they should be prepared based on an accurate and comprehensive review of the money flowing in and out of the household. In today’s virtual and plastic world, this can be a difficult undertaking: No longer do we use just checks or cash, but also credit and debit cards, automatic payroll deposits and deductions, online payments and PayPal accounts. But taking the time to collect all the statements necessary to create a true picture of existing money flows is imperative to taking financial control.

The budget itself is then created to take you from what is actual to what is achievable. What sources of income might be created or enhanced? What expenditures might be eliminated or decreased? New numbers are thus projected as realistic targets. The key is to create “profits” or excess cash flow that can support overall financial goals, both long-term and short-term.