Now that you've got the results from the Budget Maker calculator in hand, it's time to go through your spending and figure out where you may want to cut back or spend more.

This is especially urgent, obviously, if your budget investigation shows that you are paying out more than you are making! That's a scary position, for sure. But it's surprisingly common. In fact, the Labor Department numbers show that many families making about $50,000 or less are spending at least a few percentage points more money each year than they actually derive in revenue.

That doesn't mean that they--or you--are headed for bankruptcy, though bankruptcies have risen steadily in recent years. Instead, it reflects the fact that Americans are in the habit of borrowing to cover both short-term expenses, like those on credit cards, and long-term ones, such as buying cars and homes. In a later Money 101 lesson, we'll discuss detailed strategies for getting out of debt. For now, let's just say that if your spending exceeds your income, then your top priority in constructing a budget should be to slash your spending pronto. The guiding principle here is that if your income doesn't cover your costs, then some of your spending is probably for luxuries, even if you've never thought of them as such.

If your household runs in the black, you may still want to reallocate some of your spending. The calculator helps identify trouble spots by highlighting categories where your annual expenses are sharply higher or lower than average for households with similar demographics.

In some cases, a divergence will be perfectly reasonable. The average family spends only a few percent of its income on education, for example. But if you've got a child in college or private school, or are taking courses yourself, your spending will be a lot higher--and more power to you. On the other hand, if the calculator shows that you're spending twice as much as the average family on meals away from home, and there's no obvious reason why that should be so, you may want to consider eating in more often.

When projecting your income, don't include money that you can't be sure to receive, such as highly variable year-end bonuses, tax refunds, gains on investments or gambling winnings. Instead, wait until the extra cash arrives, then save or invest it to produce more revenue for the future. (Caveat: In professions for which the year-end bonus is a reliable part of the income, budget for the lowest reasonable bonus and treat any overage as windfall.)

Your goal should be to reduce your spending to about 90% of your income, with the aim of plowing the rest of that money into the financial objectives you set for yourself in Lesson 1. Money 101 will have more to say in future lessons about achieving such common aims as buying a better home, financing an education and building true financial security. For now, just make sure that the financial goals you ranked highest in Lesson 1 are reflected somewhere in your budget. For help, you might refer to the sample plans near the end of that lesson.

Once you've set your budget goals, you need to develop the habit of tracking your expenses on an ongoing basis--something that's most easily accomplished using personal-finance software. The aim here is to make sure the spending stays within the limits you've set, naturally. But there's a second aim: Very likely you will discover that some of the goals you set were unrealistic. If so, adjust them. No point in giving yourself an unreachable hurdle. Often it takes two or three revisions before you achieve a budget that you can really stick to. And if juggling the numbers leaves you wishing you could free up some extra cash, push on to the next section of this lesson for suggestions.

Next: Cutting costs