B-U-D-G-E-T … what does this six letter word mean to you? Cutting down costs? Knowing where to spend and where not to? An exercise to remind yourself to stay within your means? Do you have a monthly budget of your expense or does the very thought haunts you? Worry less as we attempt to share with the importance of budgeting, which is in short financial planning.
A monthly budget is a mechanism which takes into accounts your monthly income and expenditure so that you have clarity on your cash outlays and plan it accordingly to make it more efficient. Budget allows you to have some control over what you spend. A well-planned budget can help you to solve where to spend your money, clear your existing debts, plan your future and save every month by reducing wasteful and impulsive purchases.
Also Read: Key Budget Terminologies
Want to learn more on how to prepare your own budget? Join: NSE Academy Certified Financial Planning & Wealth Management course on Elearnmarkets.
Here’s a comprehensive list to plan your budget effectively:
It is very important to categorize your expenses into two lists; one for necessities and other for extras.
This will help you to cut down the things on your extra list, thus managing your budget. Put a star mark next to the flexible items so as to identify them.
The next step is to estimate the things you would require for a month. Once you have sorted out your list, try to get the required things in bulk orders which can help you in fetching discounts.
3. Past Performances-
You can go through your passbook or other receipts or records to have an idea about your expenses. It helps you in making an overall idea and also avoids overbuying anything which would increase your budget.
There should always be a scope for some amount of flexibility in your budget so that you can allocate some amount for some recreational purpose etc to avoid making your budget too restrictive.
Once you have prepared your budget, it doesn’t mean that the work is over.
Rather you should always evaluate your budget every month and if it exceeds your budget, you can look for reasons for the same and take some measure to overcome it or revisit your budget.
Planning your monthly budget may seem painful but a good plan can really be gainful and it can restrict you to spend uselessly on unnecessary expenses.
So what are you waiting for? Just go ahead with your budget planning. Someone has rightly said that “the hardest part is getting started”.
Union Budget is approaching. You are very much eager to know more about budget and expectations from our government.
Simply click on Budgeting & Savings.