The start of a good financial plan is creating a family budget.  When you review your income, chart your expenses and monitor your spending, you get a good idea of where your money is going.

Whether you have an envelope cash system or use a spreadsheet format (or any other method), you can plan to have enough for what you need and even what you want.  Then you make decisions and set goals that will adjust the course of your spending on a daily basis.

Managing Your Cash Flow

In order to effectively manage your cash flow, you need to figure out how much you should spend in each category.  I recently came across an example of how much, as a percentage of income, is spent on average for typical budget items.

Spending Category Percentage
Housing – mortgage/rent, taxes, insurance, repairs, décor 25 – 35%
Utilities – hydro, heating, water, phone, cable 5 – 10%
Food – groceries, eating out 5 – 15%
Debt payments – credit cards 5 – 10%
Transportation – loan, gas, registration, insurance, maintenance 10 – 15%
Clothing 2 – 7%
Medical – insurance, dentist, optometrist, medications 5 – 10%
Personal – toiletries, cosmetics, gifts, subscriptions, education 5 – 10%
Recreation – entertainment, vacation 5 – 10%
Charity 10 – 15%
Savings – emergency fund, retirement, special purchases 5 – 10%

There are no rules for how much you should spend in each category.  The value of a list like this is for comparison purposes.  You can consider each of your expenditures and decide whether they are fulfilling you needs in the best way possible, or whether you need to consider making any changes, and adjust accordingly.

Of course, everyone will have different spending patterns depending on age, size of family, ages of children, income level, where you live, type of clothing needed for work and distance to employment and shopping, to name a few variables.

Are you “Average?”

It’s interesting to see how much people spend in various categories, but be cautious about using the data to develop your own budget.  It’s not important to fit into a “cookie-cutter” scenario.  Tweak it to fit your needs.

In my case, I don’t have a mortgage or any debt payments.  I don’t have children at home, so I have no expenses there.  On the other hand, I pay more for utilities and medical expenses are huge at my house.

Check to see whether you may be overspending in some categories.  You may be carrying too much debt, or maybe you’re not saving enough.

Related: The Best Time To Start Saving Is Now

Remember the most important thing is managing your money in such a way that you’re able to save and invest enough to meet your financial goals and prepare for your future.

Do you think any of these categories are too high or too low?

How does your own budget compare to the average shown here?


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