What is Budget
managerial process as applied to money. Its success depends upon
its being realistic and flexible.
suitability to the group for which it is prepared.
quality of the control and evaluation steps which follow.
A family budget gives in detail the income and the expenditure of a family for a month or a year. It mentions all the sources of income during the period and also all the items of expenditure under different headings, such as food, clothing, housing, entertainment, travel, education, health and medicine and savings.
Steps in making a budget
List the commodities and services needed by the family members -
throughout the proposed budget plan. Group the related goods and services together. The following grouping may be helpful:
Food and related costs
Housing
Household operations – fuel, utilities
Education
Transportation
Clothing
Income tax
Medical
Personal allowances
Miscellaneous – recreation, house furnishings
Provision for future – saving, retirement
Estimate the cost of the desired items totaling each classification and the budget as a whole. General market trends must be considered while making these estimates. For example, if prices are showing an upward trend, sufficient margin should be allowed to cover such increases.
Estimate total expected income. It is helpful to list income under two headings – assured and possible income. The budget should ensure that necessities are taken care from the assured income and the ‘nice but not necessary’ items can be obtained from possible income.
Bring expected income and expenditure into balance.Sometimes expenses are more than income. There are two ways to bring them into
balance. One can either increase the income (for example by, taking up an extra job/work) or cut expenditures (less frequent outings or less
expenditure on festivals).
Check plans to see that they have a reasonable chance of success. The plans are checked in light of the following factors:
The needs of the family have been met.
The budget allows for emergencies. A joint fund may be kept aside for emergency period.
Solvency is assured. Solvency is the ability to pay bills or debts as they fall due.
The national and world-wide conditions have been considered (e.g., global economic recession).
The long term goals of the family are recognised.
Advantages of planning family budgets
Planning enables a family to take an overview of the use of their income.
Amounts allocated to various categories can be studied in relation to total income.
The budget helps families use their income to first attain those goals
which they consider most important. Spending without a plan frequently results in wastage of income.
Family members are less likely to be swayed, as they can make rational decisions which are reflective of long term goals of the family.
