For Katie Berry, the moment of truth arrived in the mail.

“I would get a credit card bill that was over $1,000,” said the former Dallas lawyer, now a stay-at-home mom. “I would look at every entry, and very few of them were over $100. I would show my husband that and said, “What are we doing?”‘

Impulse spending was killing the couple’s finances.

“We realized that most of our spending was at Target and buying stuff,” said Berry, 42, whose husband, Bo, runs a law firm. “That impulse buying – you can spend hundreds and hundreds if you don’t watch it.”

The Berrys came to the realization that they had to create a household budget.

The final catalyst came when they started seeing a financial planner.

“We needed to know how much money we needed to set aside for investments,” Katie said. “I had to pin down what our spending habits were. It’s embarrassing. You have to face it.”

budget (BUJ-it) n. A plan or schedule adjusting expenses during a certain period to the estimated or fixed income for that period.

Mention the B-word, and many people will flash crossed index fingers as if repelling vampires. Not only do they not want to expend the effort to craft a budget, they also see it as a straitjacket around their lifestyle.

But in reality, if you do it right, a budget is liberating.

“Consumers should always understand that they’re rewarding themselves,” said Bettye Banks, senior vice president of education at Consumer Credit Counseling Service of Greater Dallas.

“If they consider a budget a reward process instead of something that deprives them of something,” she said, “they’re more likely to stick with it.”

Here’s the liberating part:

“The benefit of conducting a personal financial wellness campaign is that it allows you to achieve so much more,” Banks said. “The reward is being able to handle all your needs and some of your wants. How cool is that?”

Some financial planners avoid using the word budget with their clients.

“I never use the B-word,” said Lynn McIntire, a certified financial planner at First Horizon Financial Center. “Instead, we’re going to craft a personal spending plan, so we can make choices that can make sense for us.”

Before you even begin to craft a budget, you have to understand how you’re spending your money.

“You will need to look backward at past spending before you can realistically make projections about future spending,” said Michael Busch, a certified financial planner and president of Vogel Financial Advisors LLC in Dallas.

“If you don’t currently record your spending, you can recreate your spending patterns by reviewing your last several months’ check registers and credit card statements, using these to itemize the various categories and amounts of spending you find.”

Planner Bryan Clintsman asks his clients to do a 30-day “capture” of all expenses.

“At the end of that period, sit down at the kitchen table and start sorting receipts by category, then add up each category and rank each with the highest amount first,” said Clintsman, of Clintsman Financial Planning in Southlake, Texas. “This will tell you where the majority of your dollars are going.”

Then compare that to a separate list you should make with the priorities in your life, such as family and church, and decide if dollars are following your ideals.

After reviewing your spending, it’s time to set goals. This is crucial because without goals, you could end up drifting and not establishing a spending pattern that’s disciplined and focused.

Your goals should be short-term and long-term. Some examples are:

-Establish an emergency fund.

-Pump up your other savings.

-Save enough money for a down payment on a home.

-Increase your net worth by a certain amount over the next decade.

Once you’ve established your goals, rank the goals that have the highest priority to you. Be realistic about this.

“Most people will not be able to achieve every goal,” Busch said. “Remember that budgeting is just a plan to allocate expected future income among alternative uses. It is a wonderful planning tool, but it is not magical. Difficult choices will still need to be made.”

In other words, a budget doesn’t create extra money, but it will help you see what your options are.

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“If you need to save more for a child’s education, other expenses will need to be reduced unless income can be increased,” Busch said.

Don’t get bogged down with the format of your budget. What’s more important is that you start one.

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“Try and keep it simple so you can follow it,” said Adam Salim of Keller, Texas, a sales project director. “Do something that you and your partner can view together.”

He and his wife, Joanne, use an Excel spreadsheet to keep track of their spending.

“We list our fixed expenses – our electricity and water and mortgage,” he said. Then, “We took variable expenses, such as dining out, gym membership, cable, broadband Internet connection.”

They’re doing it the right way, focusing first on fixed expenses and then on variable and nonessential expenses – areas where you can cut back.

Other tools that can help you track your spending include personal finance software, such as Quicken and Microsoft Money. Internet users can download their banking and credit card transactions directly into those programs, saving data-entry time.

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Berry uses Quicken, which forces her to confront spending hiccups.

“There’s no hiding from Quicken,” she said. “The numbers don’t lie.”

If you do decide to use personal finance software, make sure it really works for you.

“I find many people who go out and buy a fancy software program who do not take the time to learn how to use it, or the data input takes more time than they have patience for,” Clintsman said.

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Not surprisingly, the hardest part of a budget is sticking to it.

Your spending plan shouldn’t be so tight that you can’t breathe and enjoy life.

“It should not be constraining, because you’re setting yourself up for failure,” said McIntire of First Horizon. “It’s like being on a diet that’s too strict.”

Don’t try to trim back too much too quickly, and don’t beat yourself up if you stray from your budget now and then.

You have to be flexible, because unexpected expenses can throw you off.

“Every good spending plan should have a “misc,’ but there should be nothing preassigned to it,” Clintsman said. “It literally is the category that catches the “whoops’ expenses each month so you don’t have to get out the credit cards.”

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Adam appreciates the need to be flexible.

“There are months where my cash flow is negative,” he said. “I know I’m dipping into my savings to carry me through, but then I know that I will catch up in other months.”

Those who use a budget said it’s actually liberating.

“I feel so good about being on a budget,” Katie said. “I feel like I’m disciplining myself, and I feel good about the things I’m spending money on. I feel I’m in charge of my life, and that makes me feel good about myself.”

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(c) 2004, The Dallas Morning News.

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PHOTO (from KRT Photo Service, 202-383-6099): PFP-HOMEBUDGET

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AP-NY-06-28-04 0631EDT