Take a moment to reflect on your financial goals. Many people want a house, a car, and college educations for their kids. Others want a mansion, exotic foreign cars, and Ivy League educations for their kids. It’s fun to dream, but when it’s time to draw up a household budget, you need to get real.

Assess your goals and resources.

The first thing you should do is ask yourself, “Do I have realistic financial goals?” The answer depends on your goals and your resources. If you make $50,000 a year, that beach house in Malibu just isn’t feasible. But you could still be a happy homeowner with a more modest house – and without the stress of an astronomical mortgage, you might be happier still.

Whatever you do, don’t rely on get-rich-quick schemes to raise your income level. Remember when the Internet first surged in popularity? Some people became dot com millionaires. Most didn’t. If you want to increase your resources, go for tried-and-true tactics like finding a higher-paying job, working an extra job, or putting money into smart investments. 

Prioritize and prepare.

What do you need the most? You might be counting the days until you can buy yourself a new car, but you’d better put it off if big expenses are looming on the horizon. Long-term expenses like education costs for children and elder care for aging parents must be acknowledged and planned for.

When you make your budget, cut back on unnecessary costs so that you can put more money toward your obligations. And don’t forget to plan for unexpected situations. Keep at least six months of your income in a savings account so that you can draw on it in the event of a lay-off or an emergency.

Watch out for budget-busters.

We’ve all heard that kicking a daily Starbucks habit can save you money every month. That may be true, but those caramel macchiatos aren’t the only insidious budget busters out there. Fast food and entertainment can really put a dent in your bank account, but so can interest rates on credit card debt and student loans. If you haven’t already, consolidate your student loans to get a lower monthly payment. Also, transfer your high-interest credit card balances to a 0% interest card. You’ll have six months to a year to pay off the balance without throwing your money away on interest.

Get everyone on board.

It’s difficult, if not downright impossible, to stick to a budget when nobody else will. Call a family meeting and go over your objectives for the new budget. Expect your loved ones to be shocked when you reveal how much money your household spends on frivolous purchases every month. Pare down the expenses to a level that everyone can live with, and make a pact to stick to the new budget. It’s easy to limit your spending when you’ve got lots of support.