Regardless of the state of the economy, anyone can benefit from following a budget. Budgets can help you reduce credit card dependency, save for retirement or just live smarter. Promote financial literacy by involving all members of the family in your new financial plan. For example, consider opening a savings account for youngsters or a checking account for teens. Children learn to manage money by example as well as from hands-on experience.
Income
Your budget breakdown depends on your income, or how much money you have to spend on living expenses. Most budgets are monthly, so start by calculating your average income for one month. Wages from work are the most common type of income, but many people have other financial resources to consider. Money from child support payments, Social Security benefits, interest earned, side jobs and rental properties can be part of your income total.
Expenses
It can be helpful to break your monthly expenses into categories. CNN Money offers an online "ideal budget" calculator that allows you to enter income and expenses. The calculator suggests what percentage of your total budget you should allocate for each type of expense. For example, your total insurance cost should be about 4 percent of your budget. Other types of expenses include housing, debt, taxes, investment and living, which covers everything from food to entertainment and should account for about 26 percent, according to CNN Money.
Debt
According to Visual Economics, the average American family carries nearly $118,000 in debt from mortgages, loans and credit cards. The average American has four credit cards, and 14 percent of Americans have 10 or more. If used wisely, credit cards can be a good way to build credit. However, many people use them to live beyond their means or as a "safety net" in lieu of a savings account. Living on a budget can help you determine whether you need to reduce your credit card dependency.
Saving and Investing
You should have money left over at the end of the month for saving and investing. According to Visual Economics, you should have an amount equal to about six months worth of expenses in a savings account. A savings account gives you very little return because interest rates are very low, but it also is a safe investment. You also should invest some money in ways that will give you a better return so that your money will grow faster. Possible investments range from certificates of deposits, which pay relatively low interest but also have relatively low risk, to stocks, which carry relatively high risk but can provide relatively high returns--though they also can lose money. You should talk to a financial adviser or other expert about your saving and investing options.
Money-Saving Tips
Many seemingly small money-saving tricks can add up over time. Take your lunch to work instead of eating lunch out. Rent movies instead of going to the theater. Keep a coin jar or piggy bank in a central location and ask all family members to deposit pocket change there at the end of the day. When the jar is full, have the kids help roll the change. Use coupons and shop sales at grocery stores, but only for things you would normally buy. For energy-saving tips that can cut down on your electric bill and fuel costs, visit the Department of Energy's website.
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