We live in a highly leveraged society. Countries, large corporations, small businesses and regular people typically owe more money that they would be able to repay in a year. Debt has become a necessary tool for most purchases, even minor ones. But with the recent developments in the world economy it has become uncertain whether this situation can continue in a sustainable way, at least in the short run. This is why we once again hear about the long forgotten concept of budgeting.

This concept is very simple – if you ain’t got no money don’t spend it! This is how our grandparents lived and perhaps we can turn to them for advice. In addition to being the only option available for many during the global credit crunch, budgeting can actually make you free. I am talking about being debt free. And this is an amazing place to be. When you have no debt, you can easily weather a job loss or any major economic storm. Here are some ideas for living on a budget. Of course, the number one rule is never to spend more money than you make this month.

There are many ways to approach a budget, but which one you choose for yourself doesn’t matter as much as the fact that you are actually doing it. I recommend to start with the expenses which you can’t avoid – mortgage or rent, mandatory insurance premiums such as MSP and car insurance, phone bills, any other expenses beyond your control. Once you have added those up, you can see how much money you have left and how much you can afford to spend on food, clothing, toys, and how much you can save. If you are not able to save at least five per cent of your income or, even worse, can’t cover all your necessary expenses, look at the possibility of reducing your discretionary expenses first.

And if you have reduced these expenses but are still unable to make the ends meet, look at cutting those expenses which cannot be cut. That’s right, you always have an option of moving to a smaller apartment, getting rid of your cell phone, selling your car and switching to public transit or cutting your cable. Plus, think about all the free time you will have without a TV and all the extra money you will be able to make. This process will be different for each individual of the family.

What we can live without is a matter of personal preference. But failing to control one’s expenses is not a sustainable option. Otherwise your debts will eventually come back to bite you. Budgeting is not easy and requires a lot of discipline and a certain adjustment, but in the long run it will make your financial life more normal, healthy and stress free.

Nikolay Sisan is a Certified Financial Planner and freelance writer in Vancouver.