For most of us, January has always been that month in a year that we get to sit down and look at our finances from a sober viewpoint. Mainly because we are broke. And understandably so, seeing as it is that month that follows a holiday season defined by heavy spending and if I may add, spending that a good number of times is not planned for. Thus the direct impact is that we operate with limited finances, have a change in lifestyle and in extreme cases seek 'soft' loans from family and friends to manage through the seemingly perpetual days left in the month before the next payday.

But this shouldn't be the case if we can sit down and plan through out the year, in such a way that we have money assigned for various functions like holidays. A budget should aid through this.

It's sole purpose is to give you a firm grip on your finances.

To begin with, learn to treat your money like a tool. To derive true fulfillment from it, you must be able to identify what exact thing you want it to do for you, and whether it's possible in your current financial position. Then establish clear priorities.

Another important question that should arise at this point is that of necessity. If your current money habits run you into debt then you're obviously living beyond your means, spending on what you can't afford. Initiating a lifestyle change is a direct solution , though painful, in the long run it saves you a lot of trouble. Thus sit down and look at your expenses and your spending, do they really make any sense?

When it comes to evaluating your spending and expenses for the sake of crafting an effective budget,ask yourself questions like how am I spending my money now? how do I intend to spend it? Will this work for me?

Basically, an effective budget is one that is realistic often guided by some level of frugality. It is common to mistake frugality for stingyness when it's intended meaning in financial circles is simply a call to exercise caution at all times - don't go overboard and don't be too hard on yourself. Otherwise adjusting and following through will be difficult, probably setting you up for instant failure.

Once you establish what you spend your money on and the amount it takes off your income monthly you are in a better position to determine how much money you can put away as savings. Of course, after cutting down on items of non priority that you spend on.

And when it comes to savings,always consider the time value of money. Simply, money has this earning capacity overtime that you should always seek to capitalise on. So that means putting your savings in instruments that will exploit it's earning capacity to your benefit. Most importantly, the selected instrument should be able to guarantee returns that match closely, if not totally, your prioritised future cash needs.

In some instances, depending on your income, you can also set aside savings to cater for non-immediate expenses like December holiday spending. Such that you are able to pack a loved one a gift,enjoy a quality vacation and afford a smile when others complain that January is a year in itself.