Even in a robust economy, a budget plan for a household is helpful. When the economy takes a downturn, a plan for careful spending is even more important to most families.
All the income for an individual or household must be accurately recorded. Without knowing what is coming in, it is impossible to plan for careful spending. Set up the income expected for each month.
Use last year's check register to track the amounts spent on fixed expenses such as mortgage payments, insurance premiums, tax payments, utilities and food. Child care and other loan payments could be among the fixed expenses, plus many other items like transportation. These must be deducted from income immediately, every month.
Consult the check register again for the kinds of expenses that can be controlled to some extent or may be seasonal. Clothing purchases, home maintenance, entertainment and donations may be appropriate categories for optional expenses. Provided adequate income, a household may be able to anticipate variable expenses.
If a budget is to be successful, it should include provisions for saving money as well as spending it. Whether the savings are kept in a bank or some other kind of investment vehicle, money set aside at regular intervals for various purposes is the best way to provide for emergencies, save for vacations or special purchases, or invest for the future.