Budgeting Tips To Help You Get Started

Budgeting Tips To Help You Get Started

Intro:-

What comes first into your mind when you hear the word budget? Maybe you would think something very technical about financing which requires highly professional skills. Or the annual Indian budget might come to your mind. But what if I say you can also create your own financial budget on a monthly as well as an annual basis? And it is as simple as making Maggi. There are some techniques like the 50/30/20 rule in budgeting. We will cover all in this blog.

So, what is the Budget?

Budget is creating a plan to spend your money and track all your expenses in a calculative way. So, creating a calculative plan about your spending allows you to determine in advance how much money you would need to finance all your spending and expenditures. If you don’t have enough money to finance all your expenditures then you have to use the planning process to prioritize your spending and focus your money on the things that are most important to you.

So before we move on to budget planning tips, first let us understand why a budget is important:-  

1. It gives you a 360 view of where you stand financially.
2. It allows you to align all your monthly spending.
3. It works as a ladder to your financial goal.
4. It makes you stress-free about money.
5. Cuts off excessive debts or borrowings.
6. It helps you save for some emergencies.

So How Do WE Make A Budget?

Step 1- List out all your income: -

Okay so first start with listing all your income or the money you are planning to get during the month. Maybe it can be a pay cheque or the money from the sale of assets.

Step 2- List out all your expense: - 

The next step is to list all the basic four-wall expenses. (Food, utility shelter, and transportation)  Then list out all your other expenses like debt, insurance, entertainment, and your wants.

Step 3- Subtract your expenses from your income-

So if you get some leftovers then just don’t spend them here and there without thinking. Instead, put that money into your next financial goal.

If you get a negative balance then you should cut down some of your unwanted expenses and plan your expenses all over again.

Step 4- Track all your transactions: -

This is the real deal. This is one of the important ways for you to win the budgeting that is to track all your transactions. This would help you stay accountable to yourself as well as to your money.

Step 5- Make a new budget before the month starts: -

It is the final step of budgeting. And trust me it's worth repeating because you know what's going to come for you in the month. You get ready for everything that’s coming to you. So that’s why make a new budget before the month starts.

Now let’s move on to the top 10 budget planning tips:- 

1)    Plan your budget before your month begins: -

To stay on top of the budget plan, create your budget plan ahead. Sit down and plan your monthly activities and expenses a week ahead. In this way, you will have clear pictures of what's coming for you in the upcoming month and you can get ready accordingly.

2)    Practice budgeting to zero: -

Budgeting to zero means that every penny you earn and giving it a place in your budget so that there is no spare money left with you. Let's say for example you earned Rs 50000 a month. After budgeting your fixed expenses, savings, investments, and extra expenses there should not be any spare money. This method shows you where your money is going and gives value to every penny.

3)    Using the right tools: -

Setting up yourself with the right tools makes your budgeting easier. You can use some apps which would help you budgeting simple. These apps will ensure a proper success from the beginning. Some apps can visually represent where is money is going and will remind you if there is any bill pending. They also warn you if you overspend and keep good control over your money which helps you in fulfilling your budget goals.

4)    Establish needs versus wants (50/30/20 rule):-

Needs are something that you can’t survive without it.  This can be physical, mental, and financial well-being.  For instance, food, rent, and debt are mandatory to pay.

Wants are something that falls beyond these. The 50/30/20 rule states that you should spend 50% of your budgeted income on your needs, 30% of your income on your wants, and the rest 20% on savings or some investments. This would help you to properly utilize your money and reduce its wastage.

5)    Use separate accounts: -

You should have separate accounts for your fixed expenses and your variable expenses. For example, you should have an account of fixed expenses like food, rent, car loan, education fees, etc so that you keep track that how much money you are spending.

6)    Prioritize debt payment:-

When you start your budgeting and start saving for your vacation or a car, put that idea on the secondary items and try to focus on your debt repayment as this would reduce your financial risk and stress. It is also important to clear your debt on time because it can affect your credit score.

7)    Make a place for your fun too: -

The budget only succeeds if you make a separate place for fun and entertainment. If you save and invest every bit of money you earn, then it can cause demotivation and you would fail in the budgeting goal.

8)    Save first, then save: -

Most people first spend and then save the leftover. This makes saving optional for them as there are no boundaries to saving. There won't be any fixed amount of savings. So for that reason, you should focus on saving first at the start of the month and then spend the rest of it. This way there is a fixed saving every month.

9)    Start contributing to retirement now: -

It's never too early to start your savings for your retirement. Starting early will ensure that you don’t put extra effort into savings at a later age. If you start to save today, the principal amount will be comparatively higher than if you start to save at a later age.

10)                       Expect the unexpected: -

Sometimes after all the planning, there is never everything that you have planned. Because unexpected things happen and for that, you have to keep your emergency funds ready so that you don’t face a problem at that point of emergency.

Conclusion:-

Earlier the budgeting comes into action, the more stability you get throughout the years of your financial journey. More likely you would be achieving your financial goals at a lower age.