A ctivity Miscellaneous – recreation, house furnishings Provision for future – saving, retirement (ii) Estimate the cost of the desired items totaling each classification and the budget as a whole. General market trends must be considered while making these estimates. For example, if prices are showing an upward trend, sufficient margin should be allowed to cover such increases. (iii) Estimate total expected income.
It is helpful to list income under two headings – assured and possible income. The budget should ensure that necessities are taken care from the assured income and the ‘nice but not necessary’ items can be obtained from possible income. (iv) Bring expected income and expenditure into balance. Sometimes expenses are more than income.
There are two ways to bring them into balance. One can either increase the income (for example by, taking up an extra job/work) or cut expenditures (less frequent outings or less expenditure on festivals). (v) Check plans to see that they have a reasonable chance of success. The plans are checked in light of the following factors: The needs of the family have been met.
The budget allows for emergencies. A joint fund may be kept aside for emergency period. Solvency is assured. Solvency is the ability to pay bills or debts as they fall due.
The national and world-wide conditions have been considered (e.g., global economic recession). The long term goals of the family are recognised.