How to take control of your spending.

• Author: Tuttle, Marvin W.
• Position: Column

One of the first steps to building a secure future is to manage your cash flow - how money flows into and out of your household. "Management of cash flow is probably the most troublesome aspect of financial planning, and almost everyone seems to have some degree of difficulty in dealing with it," explains Eleanore Szymanski, a financial planner in Princeton, N.J.

She recommends recording cash inflows and outlays. From the cash-flow statement, you can develop an easy, realistic family spending plan that will guide you in succeeding years. Here is one that can put you in charge of your money in six months or less:

Month one. Add up your gross income for the past 12 months, including paychecks, commissions, bonuses, pensions, Social Security, child support, investments, rental property, and unemployment compensation. Then, compile your expenses for the past year, including taxes, mortgage or rent, car payments, insurance, day care, groceries, clothing, utilities, auto, medical care, dining out, health club membership, entertainment, vacations, alcoholic beverages, lottery tickets, and gifts. If expenses are less than total income, but you can't account for the gap, it's probably due to unrecorded cash expenditures. Cash often is the "black hole" of a family's budget.

Month two. To throw light in the black hole, write down every dollar you spend on coffee, stamps, cab fare, and haircuts. Do this for at least one month, though keeping records for several months will give a more accurate assessment of your cash outlays. This isn't fun, but perhaps for the first time you'll know where all your money is going.

Month three. Separate expenses by categories (housing, auto repairs, insurance, dinner out, etc.), the more precise, the better. Divide total annual income and expenses for each category into average monthly amounts. Be sure to include items not paid on a monthly basis, such as insurance premiums, tuition, new furniture, or vacations. Now you have an accurate cash-flow statement from which you realistically can project future outlays - that is, a spending plan!

Month four. Write out your short- and long-term goals. Be specific: "I want to eliminate my $2,500 credit card debt in six months, save $6,000 for a Hawaiian cruise in three years, and put away $300 each month toward retirement." Break down lumpsum amounts, such as the cruise, into monthly amounts ($167 a month will accumulate enough for the cruise in three years). Do you have enough...