Meaning of Family Budget

Family budget refers to the estimated details of income and expenditure of any household for a specific period (one year or one month). It shows the total family income received from various sources and how the family income has been distributed among different headings.

It also reflects the living standard of the family. Therefore, it is also called a plan for family consumption or expenditure. Consumption refers to the expenditure made on food, clothing, housing, entertainment, etc., for family satisfaction.

Family budget is also similar to the government budget; the government budget includes the sources of income and expenditure for one year.

Rules for Budget Preparation or Things to Consider

The following things need to be considered when preparing a family budget:

(a) One must be aware of the family's monthly or annual income.
(b) One must know the needs and special requirements of the family members.
(c) One must identify the main areas of family expenditure, such as food, clothing, medicine, education, entertainment, savings, etc.
(d) One must decide how much to spend on which items.
(e) One must identify the most important needs of the family.
(f) The budget should be flexible. This means that there should be a provision to adjust the budget from one area to another based on needs.

Types of Budget

Family budget can be divided into the following three types:

(a) Balanced Budget: A budget in which family expenditure and income are equal is called a balanced budget. It is considered a good budget.

(b) Surplus Budget: A budget in which family income is more than expenditure is called a surplus budget.

(c) Deficit Budget: A budget in which expenditure is more than family income is called a deficit budget. This type of family budget is not considered good.

Process of Preparing a Family Budget

Before creating a family budget, the expenses and income for various goods and services required for a specific period (one month or one year) are estimated. 

A sample monthly family budget is prepared based on an assumed monthly income of NPR 40,000 for a middle-class family living in the city. 

The sample monthly family budget is as follows:

Sample Family Budget

Savings/Deficit: NPR 10,000
Economics, Grade XI
Fiscal Year: 2026, September

Income Details

Expense Details

Total Income: NPR 40,000
Total Expenses: NPR 30,000

A sample budget for a middle-class family is shown above. The family’s total monthly income is NPR 40,000, which is allocated across categories such as food, education, clothing, rent, medicine, treatment, electricity, water, phone/communication, transportation, entertainment, and miscellaneous expenses. 

The largest expenditure is on food, which accounts for one-third of the total income. In other words, 50% of the total expenses are spent on food.

Since the income exceeds the expenses in this sample budget, it results in savings. Here, the family saves NPR 10,000.

Importance of Family Budget

A family budget has great importance in running a household properly with limited income. The importance of a family budget can be explained as follows:

(a) Increases Awareness of Family Income and Expenditure: A budget increases awareness of family income and expenditure. When spending according to a budget, the family is aware of how much income is generated from where and, based on that, how much to spend on which items. It also helps to spend within one's capacity and control unnecessary expenses.

(b) Balances Family Income and Expenditure: Spending according to a budget helps people reduce or increase their spending according to their income. This also helps in balancing family income and expenditure.

(c) Fulfills Important Demands: A family has various needs and demands. When spending according to a family budget, it is possible to postpone less important demands and fulfill more important ones. For example, the budget itself reveals that buying books for students is more important than buying new fashionable clothes.

(d) Saves Time and Money: Since the budget specifies where to buy which goods and when, it saves time and money.

(e) Increases Family Savings: Spending according to a budget discourages unnecessary expenses. Savings are also a component of the budget. Therefore, the budget encourages every family to save.

(f) Increases Family Satisfaction and Welfare: A family budget is prepared by considering the demands and desires of all family members. Therefore, the budget plays an important role in increasing family satisfaction and welfare.

Tasks Performed in the Household

Various types of tasks are performed in the household. These are as follows:

(a) Child Rearing and Care: The most important task and responsibility of the household is child rearing and care. After the birth of a child, their rearing, care, education, treatment, etc., are extremely important tasks performed in the household.

(b) Elderly Care: Another important task of the household is elderly care. In developing countries like Nepal, where there is no provision for social security for the elderly, the task of caring for the elderly in the family is an important task and responsibility.

(c) Farming and Animal Husbandry: In less developed countries like Nepal, farming and animal husbandry are the main occupations of most households living in rural areas. Families in these areas engage in farming and animal husbandry due to the lack of alternative occupations. Tasks such as planting crops, caring for crops, grazing cattle, cutting grass, etc., are the main tasks of rural households.

(d) Cooking: Another very important task performed in the household is cooking. In less developed countries like Nepal, the task of cooking in the household is done by women.

(e) Cleaning: Another important task performed by the household is cleaning the house and clothes. Although less time and importance are given to cleaning houses and clothes in rural areas, this task is given more importance in urban markets.

(f) Celebrating Festivals: Another important task of the household is celebrating festivals. In Nepal, festivals such as Dashain, Tihar, Gaijatra, Teej, Chhath, Holi, Eid, Losar, etc., are celebrated.