Budgeting and factors to consider

Budgeting is the process of preparing a budget. Household budget is a plan for future expenditures of a given household. Budgeting is the act of planning how to spend the net income in such a way that individual concerned will not run into any financial embarassement before the next income. It is the process whereby all the expenses to be made are listed and cost known. 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.
• Needs:  the family needs are grouped into two; primary needs which are the needs that the family cannot do without or postponed. They food, shelter, clothing. Secondary needs are those needs which the family can do without e.g buying a pair of new shoes, utility, furniture 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 net income
• Family needs
• The nature of the capital expenditure planned for
• The taste and value of the family
• The number of dependant of the family or family size
• The season of the year
• Inflation.

FOOD BUDGETING

Food budgeting is the process of planning and preparing how the money allocated for food in the family budget is to be spent. This will enable the house wife provide a balance menu for the family.a food budget includes the list of all the food items to be purchased and the cost implication.

FACTORS TO CONSIDER WHEN BUDGETING FOR FOOD

• The amount allocated for food
• The taste of the various members of the family
• The nutritive requirement of the family as dictated by the composition of the family and their health
• The types of food in season
• Availabilty of substitutes to the various food stuffs and ingredients
• Storage facilities available in the house
• The relative price of commondities in different markets so as to know where they are cheapest
• The keeping quality of the foodstuffs.

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BULK PURCHASING

Bulk purchasing is the practice of buying goods (including food) in large quantities with a view to storing them at home.

ADVANTAGES

• It is economical and saves money
• It saves time and energy
• It enables the homemaker to buy food in season.
• It is very useful for food management in large families
• It ensures that food is always in the house.

DISADVANTAGES

• It can take much of the family income and prevent purchase of other needed commodities.
• One kind of food purchased in bulk is monotonous to the family diet.
• Lack of proper storage and management of food can lead to wastage.
• Poor quality foodstuffs purchased in bulk will spoil in storage.

WISE BUYING PRACTICES

• Make a good shopping list
• Keep to the shopping list when buying
• Ensure that there are adequate storage facilities for the foodstuff to be purchased.
• Buy foods that are in season
• Judge the quality of food before buying
• Judge values of food before buying
• Make bulk purchases whenever possible
• Compare values and prices in different stores

Evaluation

• What is bulk purchasing
• state 5 wise buying principles

Assignment:

• list and explain 8 terminologies used in budgeting