Family income is the income from all sources like salary of family members, rents, and interest received from banks and savings from using skills of family members. A spending plan or budget is a planned approach to spend money based on a family's total income. It helps the family live within their income and save money for future needs and emergencies. When making a spending plan, families list all income sources and expenses, prioritize needs, allocate funds to different expense categories based on income, and aim to save around 10% of monthly income.

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Notes
16
MANAGING FAMILY INCOME
Food,shelterandclothingarebasicneedsofahumanbeing.Howcanwefulfilthese
basicneeds?Wehavetobuyfood,clothesandshelter(house).Tobuyanything,we
needmoney.Fromwherecanwegetthismoney?
Yourparentsworktoearnmoneytorunthehouseandtry
tofulfiltheneedsofallthefamilymembers.Canyourfather
ormotherearnextramoneythroughothersourcesorcan
youandyoursiblingcontributetowardsthefamilyincome?
Yes, you can by helping in the household chores like
cleaning,mopping,washingdishesorclothes.Youcanstitch
clothesathomeortaketuitionorrepairhouseholdgadgets
yourself or do typing for others. With this extra money
earnedorsavedmemberscanmeetadditionalneedsofthefamily.
Ifmoneyismanagedcarefully,wecanachieveourgoalsaswellassavesomemoney.
Inthislessonourfocuswillbeonthemanagementoffamilyincome.Letusseehowwe
candothis.
OBJECTIVES
Afterreadingthislessonyouwillbeableto:
• definefamilyincome;
• listsourcesoffamilyincome;
• defineexpenditureandsavings;
• statethepurposeofmanagingfamilyincome;
• explaintheprocessofmanagingfamilyincome;
• defineandgivetheimportanceofaspendingplan(budget);

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• developabudgetforafamily,and
• evaluatethebudgetofyourfamilyandsuggestanychangesrequired.
16.1 INCOME AND ITS SOURCES
Whateverisearnintheformofmoneywhichcomesintothefamilyiscalleditsincome.
Thisincomemaycomefromvarioussources.
16.1.1 Sources of Income
Incomecanbesalaryfromajob,parttimeclasses,rentfromahouseorshop,interest
receivedfrombankorsaleofsharesandotherinvestments.Itmayalsobeearningfrom
theuseofyourskillsorprofitfromyourhouseholdproduceetc.
Whenyouuseyourskillslikestitchingclothesforfamilymembersorgrowingvegetables
athomeforyourconsumptionorknittingsweatersforfamilymembers,youdonotget
anymoneyinhandbutatthesametimeyousavemoneywhichyouwouldhavegiven
tothetailorforstitchingorforbuyingasweaterorvegetablesetc. Suchsavingsadd
toyourincome.
Family income is the income from all sources like salary of family
members, rents, and interest received from banks and savings from
usingskilloffamilymembers.
Moneycanalsobesavedbyusingfreefacilitieslikemedicalfacilities,freeeducationfor
childrenorrentfreeaccommodation.Canyounowdefinefamilyincome?
INTEXT QUESTIONS 16.1
1. Choosethecorrectoptionfromthechoicesgiventocompletethestatement.
a. Incomemeans
i money
ii house
iii furniture
iv alltheabove.
b. Familyincomemeans
i incomeofallrelatedpersonslivinginthehousehold
ii commoditiesandservicesproducedinthecountry
iii righttoconsumegoodsandservices
iv alltheabove.

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ACTIVITY 16.1
1. Discusswithyourparentsandlistallthesourcesofyourfamilyincome.
2. Listtheskillsofallyourfamilymembers.Givethemsuggestionsastohowtheycan
contributetofamilyincomebymakinguseoftheirskills.Askthemtomakesome
productsforsale.
Planandorganizesaleoftheproductsmadebythefamilymembers.Requestyour
friendsandfamilymemberstoevaluatethetotaleffortsintermsofquestionsgivenbelow
andreportthefindingswithsuggestionsforimprovement.
i) wasthevenue,dateandtimeforsaleappropriate?
ii) stallsanddecorationswerealrightornot?
iii) weretheproductssoldtooexpensive?
iv) weretheproductswellmade?
v) did a lot of people come to the sale?
vi) hastheprofitmotivatedthefamilytomakemoreproductstosell?
16.2 EXPENDITURE
Whatevermoneywespendfromtheincomeforbuyingvariousthingstofulfilourneeds
iscalledexpenditure.Letusmakealistofalltheitemsandservicesonwhichyourfamily
spendsincome.Yourlistmayincludeseveralitemsandservicesgiveninthelistbelow.
food
housing
clothing
education
transport
medicalexpenses
entertainment
others
letusdefineexpenditure-
Incomebringsmoneyintoafamilywhileexpendituretakesmoneyoutso
that it is not available for anything else.

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ACTIVITY 16.2
Makealistofyourimmediateneeds(shorttermexpenditure)andneedswhichcanbe
fulfilledatalaterdate(longtimeexpenditure).
16.3 SAVINGS
Apartoftheincomewhichcomesintoafamilymustalsobekeptasideforfutureuse.
Thismoneywhichissetasideiscalled‘saving’andmaybeusedatanytimeinfuture
for any purpose like family needs or emergencies, children’s marriage or higher
education,oldagesecurity,healthemergenciesortobuyluxurygoodsetc.
Saving is the money set aside by the family for use in times of need.
16.4 NEED FOR MANAGING INCOME
Toensurethatsomemoneyissaved,theexpendituremustbelessthantheincome.In
ordertomanagewithinyourincome,youneedtoplantheexpenditure.Thisisknown
as‘managingincome’andmeansspendingwiselysothatallyourneedsaremet.For
this,youwillhavetomakea‘spendingplan’.
Aspending plan is a planned approach to spend money. It is based on the
total income of a family. It helps the family to live within theirincome and
also save money for future needs and emergencies.
16.5 WHAT IS A SPENDING PLAN OR A BUDGET?
Itisactuallyalistofrequirementsofallthefamilymembers,withthemoneyallocated
foreachitemtofulfiltheseneeds.Tobeabletodothisyoumustalsoknowtheincome
ofafamily.
Whymakeaspendingplan?
• Ifwedonotmakeaspendingplan,wearelikelytospendmorethanwhatwehave.
So,ifourexpenditureisgreaterthatourincomeitmayleadustoborrowmoney
tofulfilneeds.
Expenditure>Income—————————————Borrowing
(>meansmorethan)
• Toavoidgettingintotrouble,makeyourspendingplanandkeepyourexpenditure
lessthantheincome,inordertosavemoney.
Expenditure<Income——————————————Saving
(<meanslessthan)

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16.6 HOW TO MAKE A SPENDING PLAN?
Usethefollowingstepstomakeyourspendingplan:
1. Keepinmindalltheincomeandfacilitiesavailabletoyoufortheperiodforwhich
youaremakingthespendingplan.
2. List all the requirements (commodities and services) needed by the family
membersforthatperiod.
3. Prioritizetheseneeds.
4. Allocatefundskeepinginmindthetotalincome.Thiswillhelpineffectiveutilization
ofmoneyandotherresources.
5. Balancethespendingplan.Thiswillalsohelptosavesomemoney.
Secondstepislistingalltherequirements(maincategory).Allfamilieshavetheirown
spendingplanaccordingtotheirneeds.
Theitemsofexpenditureinyourfamilymaybeasfollows:
Main category Subcategory Allocation
In Rupees
Food • freshfoods
• processedfoods
House • rent
• repairingandmaintenance
Clothes • purchaseofgarments/fabric
• repairsandstitching
• drycleaningandwashing
Education • books
• fees
• stationary
• occupationalexpenses
Household expenses • fuel
• householdsupplies
• paidservices(servant)
Transport • personal(automobile)
• public
Publicutilities • electricity
• telephoneWater
• postage

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Homefurnishings
Medical expenses • adults
• children
Tax • income
• propertyorhome
Entertainment • adults
• children
Personalallowancesof
familymembers
Emergencies
Savings • savingdeposit
• insurances
• investments
INTEXT QUESTIONS 16.2
Fillinthetabledrawnbelowbywritingthebudgetheadagainsteachexpenditure.The
firstitemhasbeendoneforyou.
Expenditure Spendingheads
1. repairoftap house
2. buyingapack/stripofAsprintablets
3. goingtoafriend’shousebybus
4. eatingout
5. buyingatoothbrush
6. buyingawaterbottleforschool
7. gettingatelephoneconnectioninstalled
athome
8. payingelectricitybills
16.7 HOW MUCH TO SPEND ON EACH ITEM?
Eachfamilyhasitsownneedswhicharedifferentfromthoseofotherfamilies.(Even
yourneedsasastudentforbooks,copy,pencilpen,eraseretc.willbedifferentfrom
otherstudents).Howmuchafamilyspendsonthedifferentitemsdependsonmany
factors.

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Notes
Letusnowconsiderthesefactors-
i Income-Thetotalfamilyincomefromallsourceswillbasicallyhelptodecidehow
muchcanbespentonvariousitems.Moretheincomemorewillbethemoney
spentforpurchasingdifferentitems.
ii Sizeoffamily-Morethenumberoffamilymembersmorewillbetheexpenditure
onfoodandclothing.Hence,thefamilywillbeabletospendlessonentertainment
andluxuriesetc.
iii Age of family members- If there are school going children, expenditure on
education,schooluniform,stationaryetc.willbemore.
iv Placeofresidence-InbigcitieslikeDelhiandMumbai,costofliving,food,house
rent,travelexpensesandschoolfeearehigherthaninsmalltownsandvillages.
v Skills-Ifsomefamilymembershavecertainskillslikemakingpreservesordoing
householdrepairslikerepairingelectricalequipments,carpentryetc.thenthe
familywillhavetospendlessongettingtherepairsdone.
vi Savings-Keepinginmindthefutureneeds.
• Prioritise these needs
Youhavelistedalltheneedsofyourfamilymembers.Beforemakingaspendingplan
it is important to prioritise all the needs. Below is given a prioritized list of needs
accordingtoaparticularfamily.Youwillagreethattheneedsandprioritiesofeachfamily
aredifferent.
ACTIVITY 16.3
• Makealistofyourownexpendituresforaweekandprioritisethem.
• Askyourfriendalsotodothesame.
• Analyseanddiscusswithyourfriend,theflawsinyourprioritylists.
• Allocationoffunds
Youhavethelistofexpendituresreadywithyouandyouknowhowmuchmoneyis
available.Nowyouallotmoneytodifferentheadsaccordingtoyourincomeandsee
howmuchyouareabletosavefromyourincome.
Thetablebelowgivesyouanideaaboutthepercentageofexpenditureandtheamount
ofmoneyspentoneachitem.

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Item of Expenditure Amount (Rs.)
food (35%) 3500
housing(20%) 2000
clothing(5%) 500
family recreation (5%) 500
household operations (6%) 600
education (5%) 500
transportation (8%) 800
medical expenses (3%) 300
furnishing(3%) 300
saving (10%) 1000
TOTAL 10000
Table 16.1. Expenditure on various items for a family
Thistableshowsthemainheadsofexpenditure.Whilemakingyourownspendingplan
youcanputdowntheexpenditureoneachitemseparatelyindetail.
• Amount to be saved
Everyfamily,whateverthenumberorageofitsmembers,mustsaveapartoftheir
monthly income for later needs. The needs can be education or marriage of
children,medicalexpenses,housebuilding,buyingacarorarefrigeratordepending
ontheneedsofthefamily,thefamilywillhavetoshiftemphasisfromspendingto
saving. Asaguideitisadvisabletosaveabout10%ofthemonthlyincome.
• Balancingthespendingplan
Whilemakingyourspendingplan,youcanputdowntheexpenditureoneachitem
accordingtoyourrequirement.Themostimportantanddifficultstepinmakinga
spending plan is balancing i.e. making expenditure less than income. With
experienceweallcanmasterthisart.
Therearetwowaysofdoingthis-

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Notes
BALANCING
Two ways to do it
Earnmore
• Find other sources of
supplementary income
accordingtoyourcapabilities,
skillsandknowledgeliketaking
tuitions,stitchingclothes,making
handicraftarticlesetc.
• Increase the income by taking
up part-time job, over time,
household production like
kitchengarden,poultryfarming,
bee keeping, and making
preservedfooditems.
Thesearesomeofthewaysbywhichyoucanhelpsupplementfamilyincome.Therefore
thebestbudgetiswhereincomeandexpenditureallocationisbalanced.
Cut down the expenditure
• Do not waste food.
• Cutdownoneatingoutside.
• Checkextraexpenditureonelectricity,
wateretc.
• Ironingandwashingathome.
• Economicuseofstationeryi.e.paper,
pencilsetc.
• Useofpublictransport.
• Useofcycleinsteadofarickshaw.
• Useofpubliclibraryinsteadofbuying
storybooks.
• Looking out for sales/ rebates and
placeswherepricesarecomparatively
lower.
• Shopinonetrip.
• Avoidimpulsivebuying.
• Allocatefundstoitemswhicharenot
necessary,attheend.
Fig.16.1

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Aspendingplan
• Discourages‘impulsivebuying’i.e.keepingawayfrombuyingwhatyoureallydo
notneedataparticulartime.
• Spendingplanhelpsyoutomeetalltheneedsofallyourfamilymembers.Forthis
youmakealist,allocatemoneyforeachitemandthenspendaccordingtothe
spendingplan.
Makeaspendingplan/budgetforafamilyof5membersi.e.parents,grandmotherand
twoschoolgoingchildren.
Father’sincomefromjob = Rs. 16,000
Mother’sincomefromjob = Rs. 14, 000
Interestfrombank(fromsavings) = Rs. 1,000
Totalincome = Rs. 31,000 per month
Whenyourspendingplanisreadyandyouhavebalanceditalso.Thelaststepiskeeping
recordsofalltheexpenditure.
Whyshouldyoumaintainarecordofexpenditure?Yes,thiswillhelpyouto-
• knowhowmuchyouhavespentoneachitem
• knowwhetheryouhavespentmoreorlesoncertainitemsthanthepreviousmonth
• controlanyunnecessaryexpenditurebynotspendingmoneyontheseitems
• planforfutureneeds
• savemoney
• checkorcompareoldpriceswithnewprices
• avoidgettingcheated
The table below will give you an idea of how to keep a record of expenditure each
month.
Table 16.2
Record of expenditure
Month __________________ Year ________________
S.No. Items Week 1 Week 2 Week 3 Week 4 Total
1. Food
cereals
pulses

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Notes
vegetables
fruits
milk
ghee/oil
butter
spices
egg,meat
others
2. House
rent
repair
housetax
3. Clothes
cloth
clothes-ready
made
tailoringcharges
dhobi
ironing
shoes/chappals/
sandals
socks,handker-
chiefs
undergarments
schooluniforms
4. Education
schoolfees
books,stationary
etc.
5. Householdbills
electricitybill
waterbill
anyother

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6. Medical expenses
doctor’sfees
medicines
7. Transport
busfare
metrofare
petrol
repair/servicingof
cycle,caretc.
8. savings
9. anyotheritem
16.8 CHARACTERISTICS OF A GOOD BUDGET
a. Accurateestimatesofincome:Findtheexactamountofincomethatwillbe
availabletoyouforexpenditure.(Grossincomeofthefamilydiffersfromitstake
homepay).
b. Accurateestimatesofexpenditure: Theexpenditureestimateshouldbeas
accurateaspossible.Lookupthebudgetofthepreviousyearsortherecordsof
pastexpendituresandsavings.
c. Reasonably accurate allocation of money: The resources on expenditures
sideshouldbereasonablyaccurate;thefamilymustbeabletodetermineitspresent
needsandwantsandanticipatefuturechanges(e.g.forsomefamiliesbudgeting
forOctober-Novemberwillneedextraoutlayonspendingonfestivalsandother
occasions.)
d. Flexible:Abudgetismadeflexiblebyallowingsufficientmarginoncertainitems.
Itshouldallowyoutodivertsomemoneyfromoneitemtoanotherasperyour
need.Forexample,somemoneycanbeeasilydivertedfromentertainmentincase
ofanunexpectedhighmedicalexpenditure.
ACTIVITY 16.4
Givenbelowaresomeofthecategoriesofexpenditure.Askeachfamilymemberto
prioritizethemindependentlyandcomparetheresult.

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Notes
Items Rankingby
Father Mother Yourself Sister/
Brother
food
clothing
education
entertainment
paymentofbills
medicalexpenditure
INTEXT QUESTIONS 16.3
1. Write T for true and F for false in the space provided before each
statement. If false, write the correct answer in the line given below each
question.
a. _________Budgetistheprocessofallocatingincomeamongvarioususes.
_______________________________________________________
b. _________Familygoalsaffectthebudget.
_______________________________________________________
c. _________Abudgetforcesyoutodecidewhatismoreimportantthanthe
other.
_______________________________________________________
d. _________Abudgetcan’thelpinachievinglongtermgoals.
_______________________________________________________
e. _________Budgetinghelpsinthemanagementofyourfinance.
_______________________________________________________
f. _________Themainpurposeofabudgetistoallowyoutolivewithinyour
income.
_______________________________________________________

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g. _________Incomeofthefamilymemberdoesnotinfluencethebudget.
_______________________________________________________
h. _________Makingabudgethelpsinsavingmoney.
_______________________________________________________
i. _________Majoramountfromtheincomeisspentonfood.
_______________________________________________________
Nowyoumusthaveunderstoodtheimportanceofmanagingmoneyasitisanimportant
resource.Yourfamilymembersworkveryhardtoearnmoney.Itshouldnotbewasted.
Youmuststartmanagingthemoneyyougetaspocketmoney.Alsohelpyourparents
understandtheimportanceofmoneymanagementandhelptheminpreparingabudget.
WHAT YOU HAVE LEARNT
Rent
Freefacilities
Land
House
Bankinterest
Skills
SPENDING PLAN Helps you to
ALLOCATION OF MONEY
RECORD ALL EXPENSES Depends on
E
X
P
E
N
D
I
T
U
R
E
S
A
V
I
N
G
S
I
N
C
O
M
E
Spendwithinyourincome
Savemoney
Avoidimpulsivebuying
Meetallneeds
Incomeoffamily
Sizeoffamily
Ageoffamilymembers
Placeofresidence
Skillsoffamilymembers
Amounttobesaved
= +

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Notes
TERMINAL QUESTIONS
1. Defineanytwoofthefollowing:
a. MoneyIncome
b. DirectandIndirectIncome
c. Budget
2. Giveanyfivepointshighlightingtheimportanceof‘FamilySpendingPlan’.
3. Listthecharacteristicsofagoodbudget.
4. Requestyourfriendstodiscussandplantheirfamily’sspendingplan.Iftheyare
notwillingtodoit
• Givetworeasonstoconvincethemabouttheimportanceofaspendingplan.
• Letthemdeveloptheirspendingplans.
• Givesuggestionsforimprovingitbysupportingwithreasonsforeachflawin
theplan.
5. Definetheterm“spendingplan”andexplainthefactorsonwhichtheallocationof
moneyondifferentitemsisdecided.
6. Makeasimplespendingplanforthefollowingfamilies:
a) Afamilyoffourconsistingoftheparentsandtwochildrenaged12and17
years.TheyliveinarentedhouseinDelhi.ThefathergetsasalaryofRs5,000.
b) Afamilyofsix,grandparents,parentsandtwoschoolgoingchildren8years
and12yearsold.Theyliveinavillageandhaveasmallfarmwhichbringsthem
anincomeofRs3,000.Theschoolinthevillagedoesnotchargeanyfeesfrom
itsstudents.
ANSWERS TO INTEXT QUESTIONS
16.1
1. a. iv
b. i

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16.2 (i)house (ii)medicalexpenses (iii)transport (iv)entertainment
(v)household (vi)education (vii)publicutility (viii)publicutility
16.3
a. True
b. True
c. True
d. False-Abudgetcanhelpinachievinglongtermgoals
e. True
f. True
g. False-Incomeoffamilymembersinfluencesthebudget
h. True
a. Hewasconcernedaboutotherpeople/friends.