If you're like most Canadians, it might seem as though there's not quite enough money to do the things you want to do. Buying a home, raising a family and having a little fun aren't cheap — but they're not impossible. It just takes a little planning to make your money go the distance.

It's called budgeting — or whatever term you want to use to describe how you keep track of your cash flow.

"We don't use 'budget,' " says financial planner Judith Cane. "Sounds too much like the word 'diet.' "

If you consistently take in more calories than you burn, you will steadily put on weight, setting yourself up for potential health problems. Same goes for spending more than you earn — your debt load will quickly expand, seriously eroding your financial health.

You can avoid that by deciding how you will spend the money you have available without mortgaging your future.

According to Statistics Canada, the average Canadian spends about $20,000 a year on the basics of life — food, clothing and housing. The rest is up to you.

Cane helps her clients draw up an income and expense statement. She gives them a little book to help them track their spending — down to the last penny.

"That includes everything they put on their credit cards, any time they use their bank card and any cash they spend. In almost every case, they are surprised at what they spend on discretionary items like bank charges, magazines, books, coffee, snacks, office contributions to birthdays, retirements and babies."

Tracking your spending for a couple of months will give you a clear idea of where your money's going. Toronto-based financial adviser Sandra Foster says most people don't realize how much money they spend every month.

"You can tell if you are getting into trouble, or living beyond your means, if you are not able to pay off the full balance on any credit card [at the end of the month]. This probably means you need to create a spending plan or a budget."

The goal should be to reach the point where you can pay yourself first, but that could take a little time, she says.

"Take a look at where you are spending your money over one or two months. If you use Interac or a credit card, this should be relatively easy. And be honest with yourselves.

"You then get to decide your priorities and where you are wasting your dollars. Eventually the dollars you spend should be less than the dollars you earn — and you can start to pay yourself first."

It's easy to say "cut up your credit cards" — but it's not realistic. You can't rent a car or book a hotel room without one, Foster says. Keep one card, she suggests, but don't use it unless you have to.

Having to use it doesn't mean charging groceries for that dinner you just have to host.

Priorities are key, says B.C.-based financial planner John Kason. Come up with your list and you'll have a clearer idea of how to allocate your money.

"Once we know what it costs to keep us in a house and car and food, then we can budget the surplus. This is where the priorities come into play — and this will direct the surplus cash flow. If there is none, then lifestyle usually expands and sucks up all available cash and some."

The only way to maintain a lifestyle when you don't have enough cash is to borrow, borrow, borrow. Kason warns that if it takes more than 40 per cent of your income to service your debt, you're headed for deep trouble.

"If debt service ratios are in excess of 40 per cent, debt reduction should take centre stage until it is below 30 per cent. [Once you're there,] then saving for a down payment or RRSP contributions should begin."

'I talk [to my clients] about trade-offs. If they want to save for the down payment for a house, is it worth giving up the four nights they dine out?'—Judith Cane

Canadian credit card companies have been taking measures to protect themselves, in case consumers find themselves short of cash in a worsening economy and tempted to turn toward plastic to finance their lifestyles. Canadian Tire has lowered credit limits on some little-used accounts, so it doesn't become a lender of last resort.

"Certainly if someone is in trouble financially, there's a tendency to pick up an unused credit card, so we're just trying to manage that risk," Lisa Gibson, a spokesperson for the company, told CBC News.

The Canadian Imperial Bank of Commerce said it would tighten credit card lending through 2009, as it announced its fourth-quarter profit fell by 50 per cent from the same quarter in 2007 — mainly because of higher credit card delinquencies.

Some banks have also raised credit card interest rates by five percentage points for customers who are late with their payments. Art Thornton, a bankruptcy trustee in Ottawa, says the changes will mean more business for him.

"It's going to increase the interest rates noticeably to people who can ill-afford to pay, and it's going to render them — in many cases — insolvent."

It takes a little planning and some common sense to avoid financial pitfalls. Judith Cane says people need to get realistic about what they really can afford to spend.

"I talk [to my clients] about trade-offs. If they want to save for the down payment for a house, is it worth giving up the four nights they dine out?"

If the numbers don't add up, you have two choices:

• Increase your income.
• Cut your expenses.

For most people, the second option is usually the easier one — especially in tough economic times, when jobs are scarcer.