Spending plan

Spending plan. A spending plan can help you manage your money more effectively, live within your income limits, reduce your reliance on consumer credit, and save for the things you want.

You create a spending plan, or budget, by dividing up your income so that it covers your regular expenses -- both essential and nonessential.

It's a good idea to include some income for your emergency fund -- typically about three months of income -- and ideally some for your investment account. As a starting point, some people use what they spent the previous year to figure out their spending plan for the next year.

You may want to check the Bureau of Labor Statistics website (www.bls.gov) for the average nationwide expenditures for housing, food, and other costs. But you may have to modify that information to reflect local costs and your own situation.