If the slowing economy, shaky stock market, and mounting layoffs have you wondering whether your finances will emerge intact, it's time to take steps to reduce expenses and conserve cash. According to the New York State Society of CPAs, the most powerful way of gaining control of your money is to create a budget.

Budget is not a four-letter word
Think of a budget as an organizational tool that helps to determine where your money goes. A budget can't add dollars to your paycheck, but it can create clarity and help motivate you to more effectively spend and save the income you earn. The math associated with budgeting is elementary - you simply want the money going out to be less than the money coming in. Keep in mind, too, that the pain often associated with budgeting is short-lived. It comes mostly at the beginning of the process as you create general expense categories and set spending limits for each of them.

Where has all the money gone?
Most people can easily predict the amount of money coming in by looking at their paychecks and adding to their take-home pay any earnings from savings and investments. But when it comes to where the funds are going, particularly those that go out in the form of cash, the view is often less clear.

Here's a good way to determine how knowledgeable you are about where your money goes. Using your checkbook register for reference, list all the expenses paid by check or through direct debit during the month. Compare the total amount of recorded payments to your take-home pay and you may be left with a gap that represents cash outlays. If you're like many people, you'll have a difficult time accounting for how that cash was spent.

Life's little pleasures add up
It's easy to pick up a paperback book, a CD, or a daily coffee and muffin - individually, they don't cost very much. But when you track your expenses it becomes clear that your $3 a day breakfast habit translates into a $90 a month or $1,100 a year annual expenditure.

Experts agree that the best way to identify and gain control of the cash that slips through your fingers is, for a month or two, to keep tabs on all the money you spend. It's a good idea to carry a small notebook in which you keep a daily record of your cash spending - every last dime of it.

Making it work
Once you know where your money goes, you can create categories that reflect your spending - housing costs, utilities, food, medical expenses, entertainment, and so on. Be sure to include a category for savings, even if you haven't been able to save in the past. For items you pay just once or twice a year, simply divide the payment amount by the number of months it covers and record it in the proper category. Many personal finance software programs can help you automatically track your spending. Just remember to enter the appropriate category whenever you record an expense.

Next, write down what you have been spending in every category and then examine the categories to determine where you might be able to cut back to free up funds for saving toward your financial goals. Keep in mind that budgeting should involve discipline, not deprivation. Don't eliminate every enjoyment.

Once you have fine-tuned your budget over a few months of actual spending, you need only to compare the numbers at the end of the month to see how you are doing. If, for instance, you find that you're spending more than you planned to on your telephone bill, you may need to strengthen your resolve to limit your long-distance calls. Or, perhaps, the budget figure you set was unrealistic and needs to be revised. After several months, you should have a budget in place with which you can reasonably live.