Budgeting is the process of preparing a budget. Household budget is a plan for future expenditures of a given household. Good budgeting leads to wise management or use of a family income. Poor budgeting leads to wasteful expenditure of income.
- Family Income: The incomes of a family include the money and other economic resources available to the family for meeting their needs.
- Money Income: is the total amount of money which the family has at a given period. It is the purchasing or buying power of a family at a given period.
- Gross Income: is the total amount of money from a person’s income.
- Net Income: is the amount of money that remains after deductions, such as tax, water rate and levies.
- Budget: is the plan of how to spend the family income. The budget is normally prepared based on the net income.
- Expenditure: is the amount of money spent on the goods and services which the family needs.
SOURCES OF FAMILY INCOME
There are sources from which families get their income. They include: salaries, wages, gifts, assets or investment that yield interests; such as rents, dividends on shares e.t.c.
IMPORTANCE OF FAMILY BUDGET
- It helps the family to make wise decision about expenditure
- It helps the family to spend money on what they really need
- It prevents wasteful spending of family money
- It helps the family to see how they spend their money
- It helps to prevent impulsive buying
- It helps to train children on the use of money.
FACTORS TO CONSIDER IN PREPARING A BUDGET
- The family income
- Family needs
- Family size
- Family value
- The season of the year
PROCEDURES IN PREPRING A FAMILY BUDGET
- List all the goods and services needed by the family throughout the proposed budget period.
- Place them in order of priority or importance to the family
- Make an estimate of the cost of each need
- Estimate the total expected income for the planned period
- Bring expected income and expenditure into balance. Expenditure should not be more than income.
- Review the budget to ensure that it is likely to work.
EXAMPLE OF A BUDGET FOR THE FAMILY
The following is an example of a budget for an imaginary family of three persons that has monthly income of Ten Thousand naira. (# 10,000.00)
|FAMILY NEEDS||% OF INCOME BUDGETED||AMOUNT # K|
|Housing (rent and maintenance)||23%||2300 00|
|Entertainment and recreation||2%||200 00|
|Personal allowances||3%||300 00|
|Savings and insurance||3%||300 00|
Assignment: prepare a family budget for a family of six that earns #30,000.00 every month.
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