The choice of method of handling money that will give all member of the family a feeling of satisfaction is a matter of major importance in the life of any family. Five major methods of handling family income are in use
The Family Finance Method: This is the method of using income as a planned and shared family project. Direction of such a system naturally lies in the hands both husband wife in a cooperative manner. During the early stages of the family cycle the husband and wife share jointly in planning the distribution of the income into the expenditure pattern which represents their desired living. When the children become old and start understanding the financial matters, will share in planning along with parents. This method is based upon an understanding by both husband and wife. In this method the goals of the family, the needs and resources to meet the needs are analyzed clearly and then decisions are made. Here the income is allotted to different activities depending upon the goal priorities of the family.
The allowance or apportionment method: In this method a certain portion of money is allocated for part of the family expenditure. Usually the husband gives some fixed amount for family food expenditure to the wife. The remaining amount is used for others expenses like rent, insurance, tax, savings etc. This system is likely to be used by the business or professional group with irregular incomes.
where, A=Income kept under control of one person B= Income allotted to part or all of living costs.
The equal salary method; In this method all expenses of the family are paid from the total income and part of the income which is left, is then divided equally between husband and wife as a salary for the contribution of each to the enterprises. In this system usually the total income is very big and these will be a surplus sum remaining at the end. This system is likely to be used in the families where the wife has an independent income
Where, A is the income portion allotted for family living. B & C are the surplus divided into two shares for both
The Fifty-fifty system: Here both husband and wife divide the total income and total expenditure in to two equal parts and work accordingly. This is usually adopted in families in which the wife has independent income. Here husband assumes the responsibility for half of the total expenditure and pays from his income. Similarly wife pays for the other half expenditure from her income.
A & B represent equal income.
A is allotted to one of the two persons and B to other person.
Each person assumes equal share of expenditure.
The Handout method: Here one person, usually the head of family or husband maintains complete control of the income and hands out small or large amounts as the needs arise. This system is a carryover from the patriarchal family life where the head of the family has control over the financial resources. It is based on ‘first come, first served’ philosophy and is often used in such families where income is insufficient to meet all needs.
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