Making a budget is an important financial skill that helps students and families plan their income and expenses in an organized way. In Class 9, the topic “Making a Budget” explains how budgeting allows individuals to manage money wisely, avoid unnecessary spending, and save for future needs.
Making a Budget Class 9 Notes
Budgeting
Making a budget is a simple task, but adhering to the budget is the most difficult task. You don’t require any specific skill to prepare a budget; you need extraordinary discipline to adhere to the budget you have prepared. A budget enables you to track as to how you propose to allocate the money that you have. It helps you manage your limited financial resources more efficiently so that you can achieve your goals. A household budget is a financial plan in which you allocate the family earnings towards various expenses and savings. The household budget has many advantages, as follows:
- Through household budgeting you can exercise control over money. Otherwise money will exercise control over you.
- Budgeting helps you to prevent reckless spending.
- Above all, it helps you to have peace of mind without financial worries.
How to prepare a household budget
The Central Government prepares the Union Budget with the help of the Finance Minister; every family can prepare a household budget including all family members. In the household budget, simply check the monthly income and expenditure statement that helps to manage money wisely.
Steps for preparing a family budget
Budgeting helps to manage money wisely and plan for future goals. The steps for preparing a family budget are:
- Step 1: Calculate family monthly income, like salary, rental income, bank interest or investment returns.
- Step 2: List down family monthly expenses like house rent, groceries, electricity bill, school fees, medical & insurance, etc.
- Step 3: Allocate Income to Expense. Like if Income >= Expense, then no deficit. The budget is balanced. If Expenses > Income, then Deficit. Adjustments needed.
- Step 4: The method of allocating funds formula is Income – Expenses = Savings. Once you listed income and expenses, now it’s time to manage the money wisely. Here are two simple methods:
Method A: Envelope System (Traditional Method)
In this method write names like ‘Rent’, ‘Groceries’, and ‘School Fees’ on envelopes and keep the planned amount of money in each envelope. If the money is left, then save it for next month.
Method B: Notebook or Paper Budgeting
In this method:In this method, use a notebook or paper for making a list of all expenses. Write down how much you have spent on each item, and wheneveryou spend, write it down in the notebook. Make sure you don’t spend more than planned.
This method is helpful for staying in control of the money, saving for future needs and avoiding borrowing or running out of cash.
Tips for preparing a household budget
- Track your spending for one month:Write down everything you spend, big or small.
- Don’t Change Your Habit: Spend as usual for one month.
- Smart Saving Tips: Avoid loans unless absolutely needed. Save the electricity, like turn off fans, lights, etc. Pay the bill before the due date to avoid late fees.
- Involve the Whole Family: Discuss the budget with all family members.
- Make Budgeting a Team Effort: Budgeting works best when everyone participates.
- Budgeting is more than spending: budgeting means allocating income wisely.
- Live your own life: don’t copy others; spend based on your needs, which are necessary and valuable to you.
- Be Flexible, Not Rigid: Be flexible and adjust your budget as life changes.
Personal Budget
You may get money from a number of people—Father, Mother, Grandparents, etc.—and you may also get these at different time periods. Your father may give on a weekly basis, and your mother daily; your grandparents may give you only during special occasions like your birthday or festivals. A budget will help you plan and balance money received and money spent. Any money that is left after your expenses is the savings that you are able to create. This saving is the key element which enables you to fulfil your financial goals.
There is a difference between good budgeting skills and making and keeping a budget. By creating a budget, you can decide on how you will use your money. Adhering to a budget requires a lot of effort and discipline. Being a good money manager will help you achieve your goals.
Analysis of Budget Deviation
Analyse and focus on expenses which went beyond our control and where we have exceeded our budget. These expenses need to be further classified into
- Discretionary expense
- Non-discretionary expense
Discretionary expense is an expense where we can have better control, and non-discretionary is an expense which cannot be controlled by us. One example of a non-discretionary expense is a medical emergency. We never know when we will fall sick, and sometimes it could be serious, and we may end up spending a lot of money. You have no control over this, and we cannot do anything about it.
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