Don't be tempted to skip this step. Think of it as a critical foundation for taking control of your living expenses. Start with household expenditures. After you consider each expenditure, total them to get an estimate of the amount you need to allow for the household account each year. An advantage of making a cash flow plan is that it allows you to plan both spending amounts and the timing for that spending.
Time is a crucial element in budgeting.
Successful budgeting will adjust expense timing to closely match that of expected income. Fixed expenditures are those for which you know with certainty the amounts of money required and when the amounts are due. Examples are installment credit payments, medical and life insurance premiums, savings for emergencies and goals, etc. Variable expenditures, on the other hand, include food, home repairs, utilities, auto maintenance, and personal allowances. Utilities, for example, vary by the season of the year and should be budgeted for in a way that reduces the shock of the high bills.