First of all, you should take into account that expenses are divided into permanent and periodic, or seasonal. Permanent expenses are those made every month regardless of the time of year and any events. Seasonal ones are those made periodically in connection with the occurrence of a particular event. It is also worth creating reserve and savings funds.
How should expenses be planned correctly? As percentages, expenses should be as follows:
Permanent:
- food – 30%;
- utility payments – 15%;
- other permanent expenses – 15%;
- repayment of debts, if any – 20%;
- miscellaneous – 20%.
Seasonal:
- clothing – 20%;
- leisure and entertainment – 10%.
Reserve and savings funds:
- savings – from 10%;
- unforeseen expenses – from 5%.
So that seasonal expenses do not burden the budget, they must be built up before the right time comes. You should distribute funds monthly in the percentages indicated above, and use them when particular events occur. It should be noted that the "miscellaneous" expenses include transport, hygiene products, household chemicals and more. And "leisure and entertainment" expenses should include not only trips during a vacation and visits to public venues, but also visits to friends and relatives on the occasion of celebrations.
Note that all percentage expenses, except those that go to creating funds, are shown as maximums. That is, when drawing up a plan they should not exceed the values suggested to you. This system lets you optimize all financial flows.
All expenses, except those intended for creating reserve and savings funds, should make up no more than 90%. This means that before starting financial planning, you should set aside a certain sum from income and distribute exactly that. But such a scheme is possible only when there are no debts to either individuals or legal entities.
If your expenses do not fit within the stated norms, you need to review and, if possible, reduce certain items. Online home accounting will help you do this more competently.