The Best Family Budget: Meaning and Worksheet.

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Money is the major cause of problems in a family. The fear of not always having enough money to pay bills is the reason why families make money a big issue. A family budget can take of the fear.

What is a family budget?

A family budget is a quantitative expression of plan showing a family’s income and how that income is spent on items of expenditure. A family budget, usually for a defined period of time shows a relationship of income to spending on a family’s physiological, safety, love, esteem and self-actualization needs. In many families, spendings are limited to the satisfaction of physiological and safety needs.

However, according to “Engel’s law”, developed by Ernst Engel from a study of how 153 families spent their money, the proportion of a consumer’s budget spent on food (a physiological need) tends to decline as his income increases.

Should a family go for a fixed or flexible?


A flexible family budget designed to align the allowable expense levels to corresponding changes to actual needs should be used. This could be achieved by dividing costs into fixed and variable elements for flexible adjustments.

A flexible family budget makes control easy by comparing expected costs to actual expenditures incurred to fill actual needs.

An effective flexible family budget is the one that serves needs of all family members satisfactorily. This is achieved by ensuring that the budgetary process recognizes the following subjective elements:

  1. Clearly defined goals:

Goals of all family members should be clearly defined and understood by everyone involved, right from the beginning. These goals and aspirations should be agreed to by all involved and accepted by all. The consensus makes it possible for all family members to have the same level of motivation to work for the actualization of the family budget.

2. A flexible family budget with clearly defined goals should produce goal congruence:

Goal congruence which is an offshoot of the acceptance of personal goals of all by all, removes the imposition of one’s will on others. With imposition of authority from above out of the way, everyone takes responsibility for the success of the budget. In other words, goal congruency makes it possible to have an effective family budget.

3. Active participation by all:    

Active participation by all makes acceptance by all more achievable. So it pays to get everyone to be a part of the budgetary process. Active participation enhances the control process because all involved willingly work towards finding solutions when problems arise.

Everyone is genuinely involved in the problem solving process because they realize that the failure of the family budget may likely put an end to personal goals.

4. Motivation:

Active participation by all in drawing up a flexible family budget is a result of motivation. And motivation is key to the success of the budget as all need to be motivated to be a part of the performance evaluation.

Motivated family members try to stay in line with budgetary limits so as to reap the reward of achieving their personal goals tied to the flexible family budget.


5. Communication (Periodic reviews):

An effective communication system is necessary, if the family budget must be achieved. It is important for all family members to regularly review the performance of the budget and finds out how each member maintains acceptable level of financial discipline.

Frequent feedback improves the information system put in place to guarantee the success of a family budget. Problems are quickly identified and fixed and words of encouragement are given where appropriate.

An example of a flexible family budget:

S/NoIncome After TaxHousingFoodClothingEdu.ChildHealthVac.othersSavings
2Items of ExpenditurePercentages        
eChild Care10        
fHealth Care10        
A Simple Flexible Family Budget

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