Habits form in all of us from the time we are born. We can change our habits over time, but it is easier to form good habits from the start.\nI would argue that the most important “habit” of money management is that you should never spend more than you make. In a recent 2012 survey by CPA Canada, 17 per cent of Canadians have borrowed to cover day-to-day living costs and nearly half (42 per cent) still owe against these loans.\nThe best way to understand what you make compared to what you spend is to create a budget. A budget allows you to keep track of all of your sources of income, and plan appropriately for your expenses. If your income is greater than your expenses, you have a surplus. If your income is less than your expenses, you have a deficit. When you choose to offset your deficit by taking out loans, financial hardship is sure to follow. A budget can really help you to answer the question “where does all my money go?”\nAre you ready? Get out a piece of paper and a pencil (or turn on your iPad or your laptop). Write down your income from all sources. Common examples include the salary you receive from an employer, rental income from real estate, business income, and dividends from stocks. Break it down into a monthly amount. For example, $60,000 / 12 months = $5,000 per month. I would caution you not to include things like overtime, bonuses, inheritances, or gifts into your income. These can fluctuate with market conditions, or life situations, and may or may not be repetitive in nature. \nNext, record all of your expenses. The most common examples are mortgage or rent payments, vehicle payments, insurance, utilities, phone/internet, food, clothing, and miscellaneous entertainment. Some expenses will be fixed (fixed mortgage payment) and some will be variable (entertainment). For variable expenses, it is best to use an estimated average cost for the year, and divide by 12 to get a monthly amount. Remember to include savings on this list, and any debt repayments you have.\nCalculate the net difference between your income and your expenses. If the value is greater than zero, you are on the right track. The key to success in budgeting is keeping your expenses lower than your income, and never spending more than you make. If you can’t afford it, wait. Start saving, and then make your purchase. \nStart young, and make it a habit! I have kept a budget for as long as I can remember. I used to think I was a little bit crazy, checking my bank balance every day, making sure my spending was lining up with my monthly budget. Then I read The Millionaire Next Door by Thomas J. Stanley. Millionaires routinely budget, and control expenses. Regular budgeting is a great habit that will keep you in control of your spending today, and help you to plan successfully for your future.