BUDGETING | Webbpedia

HOUSEHOLD BUDGET

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.

BUDGETING TERMS

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 etc.

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
Locality

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
Food	30%	3000 00
Housing (rent and maintenance)	23%	2300 00
Clothing	10%	1000 00
Health	10%	1000 00
Transportation	6%	600 00
Education	13%	1300 00
Entertainment and recreation	2%	200 00
Personal allowances	3%	300 00
Savings and insurance	3%	300 00
Total	100%	10,000 00

Assignment

Prepare a family budget for a family of six that earns #30,000.00 every month.