Family budget

Household budget is a plan for future expenditure of a given household. Budgeting involves planning ahead on how to spend the total money or income that one earns.

THE INCOME: This includes the money and other economic resources available to the family for meeting their needs.

MONEY INCOME: This is the amount of money which the family has at given period

GROSS INCOME: This is the total amount of money from person’s income

NET INCOME: This is the amount of money that remains after deductions such as tax, have been removed from the gross income

EXPENDITURE: This is the amount of money spent on goods and services by the family

1. FAMILY NEEDS

Family needs are those things on which family members are willing to spend their income. These needs are divided into two main classes:

1. Primary needs: These are the very important needs which are needed for good health and survival. The family cannot do without them. They include food, clothing and shelter.
2. Secondary needs: These are needs which the family can do without, though they are desirable. Examples are cars, education, entertainment, savings e.t.c

IMPORTANCE OF FAMILY BUDGETS

1. Family budgeting helps the family to make important decisions about their  expenditures
2. It helps the family to spend money on what they really need
3. It prevents wasteful spending of family money
4. It helps the family to see how they spend their money.
5. It helps to prevent impulse buying
6. It helps to train children on the use of money

FACTORS THAT INFLUENCE FAMILY BUDGETING AND EXPENDITURE

1. The Family Income: the budget is made on the net income
2. Family needs: These determine the specific goods and services which will be budgeted for
3. Seasons: The seasons of the year should considered by the family when planning their budget. There are some materials that are cheaper and are more easily available when in season
4. Locality: Where the family lives also plays an important role in the family budget. The budget for a family living in a rural area will differ from a family living in an urban area
5. Inflation: This is the continuous upward movement in general price level. When this occurs the prices of goods and services become high.

STEPS IN PREPARING A FAMILY BUDGET

In preparing, a good budget, the following guidelines should be adopted:

1. List all the family needs during the proposed budget. This should include both the primary and secondary needs
2. Place the needs according to the family priorities e.g food, shelter, clothing, education, savings e.t.c
3. Give an estimate of the cost of each need giving a higher percentage according to the family priorities
4. Estimate the total expected income for the budget period
5. Balance the expenditure with the income. Make sure that the expenditure is not more than the income so as to avoid budget deficit
6. Give the budget a trial to ensure its an occurrence.

A N10,000 budget

Assessment.

1. What are the factors that influence family budgeting and expenditure?
2. Mention 5 importance of family budget.
3. What are the major steps in preparing a family budget?
4. What is gross income?