Updated: Feb 10
Start improving your finances and master money management through basics of budgeting .
Like most of you will be wondering now and imagining that budget is for Giant companies and governments, I used to wonder the same way few years back but with time I realised the importance of budgeting in my personal expenses , if you want financial independence throughout your lifetime.
Initially for most of us it might not be the most fun to calculate your numbers and mange how to spend and save money but it is good to start some where and it's also critical early on in your journey . Once you start getting the results and enjoy working around this numbers you will start digging deep into money management and budgeting. It will become like an ideal scenario of marriage where both husband and wife is working towards one goal.
Understanding and creating a personalised budget you start the first step towards taking control of your money and build a roadmap that will help you succeed in present and future .
Are you still wondering what are the budgeting basics ? How to get started and what are the different types of budget styles?
Worried now , don't worry I will cover everything you need to know in the budgeting article series
#1 WHAT IS A BUDGET?
It is a structure that helps you to manage your earnings, current recurring expenses, helps you to have a framework to save for your future goals over set periods of time. With a budget , you will have a plan for your spending and also an understanding about your financial health in current time. You have various options for budgeting, I prefer to create a budget via writing it down on paper , while others like to use an excel spreadsheet or a personal finance app or software.
#2 WHO SHOULD BE BUDGETING?
Budgeting is an important tool for every individual who is earning money and spending irrespective of your age and income. This activity helps you to remain in control and focus of your money with your goals and keep at bay any kind of mental stress caused by financial stress .
Understanding budgeting will help you to improve your relationship with money and also give you an exact picture of your financial health . It is one of the strongest tool that will help you get out of debt , start saving for your future and also be prepared for any unexpected circumstances for example the Covid - 19 situation.
Few years ago when I started working and earning money I used to feel that I know about my current finances and how much I am spending which most of us do, I am sure you will agree . However when I sat down one day looking at my debts and credit card bills I was surprised to see that firstly I was way off and also there were a lot of useless spending on products which never got used and was dumped in one of the wardrobe.
BEGINNERS BASICS FOR BUDGETING
Here I am sharing some of the steps that I followed when I started as a budgeting beginner. I am hoping this might motivate you to get started in the world of budgeting . I have learned the entire process through trial and error basically the hard way , hence I am sharing all my learning , you can build a more complicated and in-depth budget over time or if you already have some experience .
BELOW ARE THE STEPS THAT I FOLLOWED AS A BASIC RULE
#1 CALCULATE MONTHLY INCOME
The first step to start budgeting is to calculate your total income which will help you to guide your towards the journey of making a successful budgeting .
Total income is the amount of money that you get in hand after all kinds of tax deductions.
#2 ADD ALL FIXED EXPENSES
Once you have pen down all your income after tax deductions now its time to add up all your fixed expenses . Now what are fixed expenses ? These expenses are recurring in nature and is essential expenses like house rent or paying for your mortgage, grocery , electricity bill , conveyance expenditure , water bill, phone bill , Internet bill etc , without which you will not be able to function in a proper way . That is also debatable as it depends from individual to individual. Like something that is a luxury for me might be a necessity for someone to perform well . This I leave up to you to decide .
#3 ADD VARIABLE EXPENSES
You cannot forget variable expenses these are unpredictable expenses like someone’s birthday amongst close relatives , office self contributed party , medical expenses or a sudden shopping requirement which cannot be procrastinated . If you want to find out how much to allocate for this kind of expenses then I would suggest take a look at your past bank statements to get a fair ides . Then you can add 10% - 20% to the average cost per month . This may be lesser or higher in some months and this will help you have some room .
#4 ALLOCATE A BUDGET
What I do is , I subtract my fixed expenses from my monthly income and what ever is remaining that becomes my amount to play with . I then start allocating it to my savings and spending or in investment bucket . I always try to be realistic to see how much I can spend in each category : once I run out of a particular category I stop spending on the category unless its extremely urgent but at the same time I try to subtract that extra amount next month from that category .
#5 START MONITORING YOUR PROGRESS
It might sound very easy that your budget is ready and you are done but the core part of budgeting starts when you start tracking the progress. Initially it is very easy to get started but then eventually we start falling back into our old financial habits . So it is important that you spend some time each week to go over your plan , savings , spending and investments for the past week.
Also goals will change overtime and so can your income and expenses which means that you have to keep altering your budget now and then .
This is what I had done when I first started with the budgeting plan . Over the next few blogs I will share more and more details that will help you to start a budging plan early in life and attain Financial Independence .
ARE YOU ALREADY BUDGETING ??? WHAT PROCEDURE DO YOU FOLLOW ??? AND DO YOU GUYS THINK IT HAS HELPED YOU GUYS TO MANAGE YOUR FINANCES ? PLEASE COMMENT BELOW AND SHARE YOUR THOUGHTS SO THAT WE CAN HAVE A BEST SHARING PRACTICE COMMUNITY .