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Follow a Plan

You may be recently married, your incomes may have changed or maybe you simply want to reorder the books. Here's help creating a sensible household budget.

In these tough economic times, it’s more important than ever to develop a budget. Whether you are saving for a vacation, a down payment on a house or a new pair of shoes, if you stick to a plan, you’ll likely achieve your goal. Use these tips to help.

Be a Spending Sleuth

Assess how much money you spend versus how much you make. Track every penny you spend for a month by keeping receipts and writing everything down. Add your fixed expenses, such as mortgage payments or rent, insurance premiums, tithing and charitable giving. Then list your monthly income from all sources and compare it to your expenses. This eye-opening process will help you see where to cut back.

Evaluate the Essentials

After cutting discretionary expenses, evaluate how you can reduce what you’re paying for necessary ones. “The biggest secret, I believe, is minimizing the costs on things essential to your financial health,” says Joshua Duvall, a financial services professional with New York Life. “For example, shop around for all your insurances. Sometimes you can save $50 to $500 a month just by getting more competitive rates on things you need and are already paying for.”

Put Savings on Autopilot

Save a portion of your income through direct deposit or automatic transfer. Almost all banks will, upon request, automatically transfer funds monthly from your checking account to savings.

Take It One Day at a Time

Have a goal to save a certain amount in a year. To make the task less daunting, calculate how much you’d have to save each day to reach your goal. For example, to save $1,000, divide 1,000 by 365, and you’ll see you simply need to save $2.74 each day. Then consider what you can cut out of your day. For example, make coffee at home instead of swinging by the coffee shop; bring your lunch to work using last night’s leftovers; make handmade cards or baked goods for friends and relatives instead of buying cards and gifts; opt for a rented movie over taking in the latest at the theater; and buy generic brands.

Plan Ahead

Calculate your current and future net worth—the dollar amount representing all your assets minus your debts—using America Saves Personal Wealth Estimator, with a website at americasaves.org/for-savers/201. It will calculate your current and future wealth for 5, 10, 20, 30, 40 or 50 years. Aim to create a positive net worth that grows each year. Your net worth is part of what you’ll draw on to pay for financial goals and retirement. A strong net worth will also help you should you face a major crisis in your life.

Stick to It

Continue to keep track of your spending every month. Update your budget as expenses or incomes change. Check out the free expense tracker website mint.com. If you have a smart phone, check out the free apps Toshl Finance and Expensify. They make it easy to track every penny you spend.