• Managing money begins with understanding how it is spent.pie graph image by Tomislav from Fotolia.com
  
  When budgeting for a family, one of the most important first steps is to understand the areas where money is being spent. Once it is clear where money is going, it is much easier to effectively allocate it and create a working budget. While every family is different, taking a look at the average American family's spending habits can shed some insights on your own.
  
  

Big 3

• Visualeconomics.com breaks down the top ten ways in which American families are spending their hard-earned dollars. The biggest expense for American families is easily housing, claiming roughly 34% of yearly expenditures. This includes shelter, utilities, housing supplies and furnishings. Transportation comes in at number two, accounting for 17.6%. This includes automobile purchases and fuel. Rounding out the top three is food at 12%. This is for both food within the home and dining out.
  
  

Second Tier

• Insurance and pensions come in at number four with 10.8 %. This category includes personal pensions and social security. Health care claims the fifth spot at 5.7% of yearly spending. Health care plans, doctor's appointments and medical emergencies would fall into this category. Entertainment slides into the sixth spot with 5.4% of spending. Movies, concerts, theme parks and balls games would fall into this category. Seven is held by apparel and services at 3.8%. Clothing would make up the largest portion of this expenditure.
  
  

Rounding Out

• Cash contributions sneak its way into the top ten at number eight, claiming 3.7% of yearly spending. Education is ninth on the list, claiming a mere 1.9% of yearly expenses. Tuition and books would make up the components of this category. 1.6% of American's spending goes to miscellaneous, rounding out the top ten.