Family budget

INTRODUCTION:- A budget is a financial plan for a

defined period, often one year. It may also include
planned sales volumes and revenues, resource
quantities, costs and expenses, assets, liabilities and cash
flows. Companies, governments, families and other
organizations use it to express strategic plans of activities
or events in measurable terms

A family budget is a statement which shows how family

income is spent on various items of expenditure on
necessaries, comforts, luxuries, and other cultural wants.

It shows the distribution of the family income over the

various items of expenditure.

CHARACTERISITCS OF A FAMILY BUDGET

The basic characteristics of a family budget are as follow:-

1. Has been measured against actual spending activities for a period of

time (tracking)
2. Is realistic for your situation
3. Allows for savings, especially for emergencies
4. Helps you work toward stated goals
5. Has “rewards” built into so that you aren’t depriving yourself
6. Lets you adjust on-the-fly if circumstances change or initial projections
aren’t accurate
 7. Doesn’t include overtime or bonuses as a part of guaranteed income
8. Reflects empowering choices
9. Has input from everyone whose life will be impacted by the budget
10. Is as thorough as possible

FUNCTIONS OF BUDGET
Avoid Family Conflict
Finances are a common source of conflict between couples, often because their spending styles
differ or they're at odds over managing debt. Creating a budget starts you on the same page by
giving you an objective view of how much money is coming in and how much is going out.
Knowing where you stand is the first step toward reaching an agreement about how to
manage your finances with the resources at hand.

Identify Unnecessary Costs

Knowing exactly where your money is going helps you identify opportunities to reign in
costs. It's not just about the price of coffeehouse coffee, lunches out and too-frequent shopping
sprees. A family budget is particularly helpful in uncovering more insidious waste, such as a
cable TV package you rarely watch or a landline phone no one uses.

Reach Financial Goals

It takes careful planning to achieve financial goals. Your family budget can get you there faster
by helping you see your current situation in a new context. For example, your goal may be to
eliminate credit card debt by a certain date. Success likely depends on you figuring out how
much you need to pay each month, then reprioritizing spending to free up the extra
money.
Longer-term goals, such as target retirement savings, may depend even more on a budget. It's
easy to put off saving for an event that's years away, but each delay puts the goal a little further
out of reach.

ADVANTAGES OF A FAMILY BUDGET:-

. Budgeting helps in the proper distribution of family income for satisfactory

living.

2. It is a valuable means of comparing various items.

3. Budgeting facilitates adjusting irregular income to regular expenditure.

4. It helps to live within one’s own income.

5. By budget we can identify the unnecessary and extravagant expenditure.

6. A budget determines how a family can use all its resources

7. Budget can help to save for future.

8. It can help in development of goods buymanship.

9. Budget keeps one free from financial worries and anxieties.

10. It encourages conscious decision making.

DEMERITS OF A FAMILY BUDGET:-

1. Budget becomes a failure in case of irregular income.

2. The illiterate people are unable to know the techniques of budget as it is a

written plan.

3. Extra expenditure cannot be met easily when a family makes a budget.

Sometimes saving becomes lower.

4. If the members of the family do not co-operate with the home maker, the
budget is becoming a failure.

5. The housewife becomes tensed when her plan of budget cannot work
properly.

Types of Family Budget:

Budget can be of three types:
A. Deficit budget:
When the expenditure exceeds income, it is known as deficit budget. It is not at
all desirable.

B. Surplus budget:
In this budget, the income is more than the expenditure. The family is able to
save more in this budget.

C. Balanced budget:
This is a good budget. In this budget, income and expenditure are equal and
the estimated income meets the estimated expenditure.

PROCESS OF MAKING A FAMILY BUDGET:-

Step 1: Note your net income

The first step in creating a budget is to identify the amount of money you have
coming in. Keep in mind, however, that it’s easy to overestimate what you can afford
if you think of your total salary as what you have to spend. Remember to subtract
your deductions, such as for Social Security, taxes, 401(k) and flexible spending
account allocations,

Step 2: Track your spending

It’s helpful to keep track of and categorize your spending so you know where you
can make adjustments. Doing so will help you identify what you are spending the
most money on and where it might be easiest to cut back.

Step 3: Set your goals

Before you start sifting through the information you’ve tracked, make a list of all the
financial goals you want to accomplish in the short-and long-term. Short-term goals
should take no longer than a year to achieve. Long-term goals, such as saving for
retirement or your child’s education, may take years to reach. Remember, your
goals don’t have to be set in stone, but identifying your priorities before you start
planning a budget will help.
Step 4: Make a plan

Use the variable and fixed expenses you compiled to help you get a sense of what
you’ll spend in the coming months. With your fixed expenses, you can predict fairly
accurately how much you’ll have to budget for. Use your past spending habits as a
guide when trying to predict your variable expenses

The following is a typical family budget of a person with a monthly

income of Rs. 900.

Item Expenditure Rs. Percentage

Food 540.00 60%

Fuel 54.00 6%

Clothing 90.00 10%

House Rent 72.00 8%

Lighting 18.00 2%

Children’s 36.00 4%
Education

Medical Aid 9.00 1.0%

Travelling 9.00 1.0%

Religious and 18.00 2%

Social Ceremonies

Entertainment and 18.00 2%

Luxuries

Miscellaneous 36.00 4%
Total Rs. 900.00 100%

This is the family budget of our imaginary consumer family.

SO AS WE SAW HOW BUDGETING IS BENEFICIAL FOR US

EVERYONE SHOULD OPT THIS PROCESS AND APPLY IT IN
THEIRDAILY LIVES.THROUGH THIS PROCESS WE CAN
EASILY DIFFERENTIATE OUR RECEIPT AND OUR PAYMENT
OF A PARTICULAR PERIOD OF TIME AND THAN CAN DO
FURTHER ANALYSIS OF DATA AND INVESTMENTS
REQUIRED,THIS ENABLES APERSON TO HAVE PROPER
PLANNING OF THE INCOME AND THE EXPENDITURE