Households across Indonesia continue to face financial pressure as the prices of food, education, healthcare, transportation, and other essential goods increase. While household incomes often remain relatively stable, expenditures continue to rise, making financial planning an essential life skill rather than an optional practice. The authors emphasize that many families still struggle to distinguish between essential needs and discretionary spending, increasing their vulnerability to financial stress and consumer debt.
The study also points to financial literacy as a critical factor influencing household financial health. According to Indonesia's National Survey on Financial Literacy and Financial Inclusion (SNLIK), the country's financial literacy index increased from 38.03% in 2019 to 49.68% in 2022, reaching 66.46% in 2025. Although this represents significant progress, approximately one-third of the population still lacks sufficient financial knowledge to effectively manage income, savings, and unexpected financial risks.
Inflation further complicates household financial management. Indonesia experienced relatively low inflation during 2020 and 2021 before inflation peaked at approximately 5.51% in 2022. Although inflation declined during 2023 and 2024, it increased again to around 3.55% in January 2026, continuing to affect purchasing power and household spending decisions. These economic conditions reinforce the importance of careful budgeting and financial prioritization.
To address these challenges, the research team organized a Community Service Program (Pengabdian kepada Masyarakat/PkM) entitled Household Budget Management Based on Priorities and Monthly Planning at Yayasan Ruhama Al Fajar Kaliputih. The educational program combined presentations, interactive discussions, and question-and-answer sessions to help participants improve their understanding of personal finance.
Rather than relying solely on lectures, the program encouraged participants to discuss their own financial experiences and everyday budgeting challenges. This interactive approach enabled the facilitators to provide practical solutions tailored to participants' financial circumstances while encouraging peer learning among community members.
The educational materials focused on several key aspects of household financial management, including:
- Identifying and prioritizing essential household needs before non-essential spending.
- Preparing consistent monthly budgets to monitor income and expenses.
- Distinguishing between needs and wants to reduce unnecessary consumption.
- Building emergency savings to protect against unexpected financial events.
- Developing long-term saving habits to improve household financial resilience.
One of the article's central messages is that inflation directly reduces purchasing power when wages do not increase at the same pace as prices. During periods of high inflation, households with fixed incomes become particularly vulnerable because everyday expenses consume a larger share of their earnings. Consequently, prioritizing essential expenditures becomes increasingly important for maintaining financial stability.
The authors also highlight the importance of maintaining an emergency fund. Drawing upon established financial planning literature, they explain that households should ideally accumulate emergency savings equivalent to three to six months of regular living expenses. Such reserves allow families to cope with unexpected situations, including job loss, illness, or emergency repairs, without relying heavily on debt or selling productive assets.
Another significant finding concerns the distinction between needs and wants. Essential needs include food, housing, healthcare, education, and clothing—expenses necessary to maintain daily life and well-being. Wants, by contrast, are shaped by lifestyle preferences, social influences, and consumer trends. Recognizing this difference enables households to allocate financial resources more effectively and avoid unnecessary spending.
The article further explains that improved financial literacy contributes directly to stronger household resilience. Families with better financial knowledge tend to make more rational spending decisions, manage debt more responsibly, establish emergency funds, and maintain healthier saving habits. These practices not only improve day-to-day financial stability but also prepare households to withstand future economic shocks.
According to I Made Aryata, I Gede Marendra, and Irmawan Afghani of Universitas Pamulang, strengthening financial literacy through practical education empowers families to manage income more effectively, prioritize essential expenditures, and develop sustainable financial plans that enhance long-term economic resilience. Their work demonstrates that financial education can become an important tool for improving household welfare, especially during periods of economic uncertainty.
The broader implications of the project extend beyond individual households. Financial literacy programs such as this can support community development, strengthen national economic resilience, reduce excessive consumer debt, and encourage healthier financial behavior across society. The authors recommend expanding future educational initiatives to include practical training on family budgeting, responsible debt management, the use of formal financial services, and basic investment strategies appropriate for household income levels.
Author Profiles
I Made Aryata is a lecturer in the Management Study Program, Faculty of Economics, Universitas Pamulang. His academic work focuses on management, financial literacy, and community economic empowerment.
I Gede Marendra is a lecturer in the Management Study Program, Faculty of Economics, Universitas Pamulang. His expertise includes household financial management, financial planning, and community development.
Irmawan Afghani is a lecturer in the Management Study Program, Faculty of Economics, Universitas Pamulang. His research and community engagement activities focus on economic education, financial management, and public empowerment.
Source
Article Title: Household Budget Management Based on Priorities and Monthly Planning
Journal: Jurnal Pengabdian Pancasila (JPP)
Publication Year: 2026
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