Although the word 'budget' might send shivers down your spine, it's really not as bad or as difficult as you might think. Budgeting does require some discipline, yes but if more people used it in their daily lives, far fewer people would file for bankruptcy on an annual basis.

In fact, according to an ABC News report, more than 100,000 people under the age of 26 filed for bankruptcy in 2003. This was due largely to credit card and student loan debt.

So in other words, these people were spending more than they were earning and certainly more than they could pay off on a monthly basis. Sure, it might seem obvious to you now that you should pay all your bills off completely at the end of each month and have enough left for savings and living in general. But without a budget, how will you know what the right amounts for these things are?

Immediate gratification is the name of the game. Advertisers would have you believe that to live without it is to deny yourself a freedom or right. But the truth is that you have the power to wait until later to get what you want.

Budgeting is all about prioritizing your money so that you can save for your future and still live debt-free or as close as possible. It's simple: you pay what's absolutely necessary, save money, then use what's left to live on.

Many people are still trapped living month-to-month, despite the ability to free themselves from the ugly cycle. It's no secret that you should have at least three months' savings stored up, if not more. The point here is to have money for emergencies or sudden job loss or retirement later on down the road.

The misconception about budgeting is that it's difficult. Well, we'd like to show you that it's really not. In fact, here are the steps to budgeting:

1. Figure out how much you need to save. You should save at least 10% of your income on a monthly basis. If you can do that, you should have your three months of income saved up in about two and a half years. That may sound like a long time now but it will come and go. So as soon as you get paid, immediately shove 10% into your savings account and forget about it. That's right, pay yourself first.
2. Figure out where money goes on a monthly basis. List everything, from house bills, to gas for your car to tolls, to taxes and right on down to debt repayment. Leave no repeating bill unlisted (except for savings) and add all those things up. Then, make sure not to forget those non-repeating expenses: car repairs, holidays, etc. They need to be accounted for as well. That's your monthly spend and your income (minus savings) needs to be greater than this. If it's not, you either need to get more income or get rid of/decrease your bills. It's very simple.
3. Figure out how much you need to live and be comfortable. This is the amount you need to set aside each month after you've set aside money for savings and bills. It's your "mad" money or money you can spend on entertainment, clothes or whatever you'd like.
4. Tally it all up and make sure it fits into your income.
5. Stick to it as strictly as you can. If nothing else, make absolute certain you set aside your 10% per month, if not more.

So there you go. Five steps to budgeting. That wasn't so hard now, was it? Give yourself a few years and you'll have more money than you ever thought you would. Oh and do yourself a favor, use a high-yield savings account from the likes of INGDirect or HSBC. That way, you can earn upwards of 3-5% on your money each year. That way, you can retire younger and wealthier.

And that is why you need a budget.