Budgeting helps a family to allocate its income to meet its various wants and needs by proper planning. Planning therefore, enables a family to take an overview of their use of income, thus seeing in its perspective. It is a valuable means of comparing various items of income and expenditure.
In addition to this, budgeting facilitates adjusting casual or occasional income to regular expenditure. It encourages conscious decision making which may help in reflecting long term goals in the budget. It forces one to decide what one wants most out of one’s life, thereby helping a family to live within its income. It can also help in developing good buymanship or purchasing skills and better consumerism, and it can force a family to save by proper planning. Thus one feels financially secure. A budget gives a clear picture of its various items of expenditure and so helps to identify wasteful expenditure. Adjustments arising from increase or decrease in family size are more easily accomplished when the family operates on a budget. Finally, the budget indirectly determines the use of other resources and the kinds of interest which the family is developing.
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