What Is A Family Budget and Why You Need It

What is a Family Budget

Just what is a family budget? A family budget is a plan that is drawn by members of a family consisting of the total income that the family gets every month and also the total expenditure that the family incurs every month. Although the people responsible for making this budget are the parents, all the other family members should be aware of what the budget entails. This is because it will affect the different aspects of their lives. For a family budget to be effective the following should be put into consideration

The amount of income is the first thing that should be taken into consideration. This is because the amount of money to be spent is pegged on what is available for spending. The family should endeavor to always spend less money than the amount that is available to ensure that it lives within its means. If this does not happen, it will make the family live off debts which might accumulate to unmanageable levels. This will create a financial constraint in the family and is likely to destabilize the family further.

What is a Family Budget Made Of?

After determining the total amount of income available per month, the second step involves looking at the size of the family. The number of the family members, their age and their unique needs should be considered. This is because members who are sick and children require special food hence making the family budget go up.

The family budget should satisfy the basic human wants and cut down on things considered as luxuries to the bare minimum. This does not mean that the luxuries should be eliminated from the budget they should not become a priority.

The budget should cater for the education needs of the family. This should comprise of money required for tuition, books and even transport .The needs of the house should not be forgotten. In case the family has engaged the services of a house workers, their wages should be included there. Another expense includes the bills for water, gas and electricity. The amount used for the maintenance of the house should be included also. The health of the family should not be forgotten. The family might decide to take a medical cover to take care ofthe health of all the family members.

After all the above expenses are catered for, the family budget should be drawn in such a way that it will leave some allowance for savings. The minimum amount that a family should endeavor to save should be 5% of the total income every month. This should not be taken after the expenses are deducted because in most cases the expenses will surpass the income. The savings should be put away before the other expenditures are put into consideration. This is the kitty that should be utilized in case there is an emergency.

What is a Family Budget – Paying Down Debt

In case there are some debts to be paid, the family should restrict such debt repayment to 15% of the total income.  Still the goal of the family should be to eliminate debt all altogether – and not get into it again.  What is a family budget – it’s the plan to put your family on the right financial path.