In part two of our three part series I will focus on why it is important to have a budget? To do this, we must know what a budget is. A budget is a plan that shows the ins and outs of money or shows what you earn, what you spend and what you save. A budget helps you to accomplish the following:

1. Shows you how you spend your income.
2. Allocates funds for family.
3. Places control on spending and prevent unnecessary spending.
4. Provides needed discipline.
5. Puts systems in place for you to give to God.
6. Provides for the unexpected.
7. Unites the family into decision making.
8. Helps you to make wise financial decisions.

Let us say that the Browne’s family, comprising three persons, would like to acquire new furniture for their home which cost EC$20,000.00. In their savings, they have EC$8,000.00 and can have a yard sale to raise another EC$3,000.00. This gives them EC$11,000.00 and a balance of EC$9,000.00 to accomplish their goal. They plan to save EC$225.00 per month which will take them 40 months (3 years and 4 months). They made a decision to wait 3 years before they purchase the items.

Even though the dynamics will change, the family has a plan. The family later decides to increase their savings to EC$300.00. This will take them 30 months (2 years and 6 months). They have a new plan but the question is where they would get the additional EC$50.00 per month. A budget will provide guidance whether it is a wise idea to purchase or not. To find out, they will need to draw up a budget to show their income, expenditures and possibility of saving the additional cash before committing themselves to this new plan.

The budget below is based on both partners income which is EC$6,500.00 each and the figures are suggested.
The budget shows the following:

1. How they are spending their income.
2. The Browne’s family cannot afford the furniture now.
3. Their expenditure is more that their income.
4. They are saving less than 20% which is not the best.
5. They are spending more that a third (1/3) of their income in debt repayment.
6. The excess will have to come from their savings. This lets them know how much they are really saving.
7. Multiply this by twelve (months in a year) and you will see the financial picture for a given year.

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