As I have already mentioned that this is primarily a financial blog, so I thought of that my next post will be on budgeting – the basic step to manage personal finance efficiently. Most of us are aware that we need to budget so that we can have a spending plan and save a definite amount every month. Here is a checklist of a few essential steps which we should follow in order to plan a suitable budget.
4 Steps to plan a suitable budget
There are 4 simple and basic steps to plan a budget.
Calculate how much you earn every month:
Make an estimate of your expenses:
Now, open a spreadsheet and list your expected monthly expenses against each item. At first, you list your fixed monthly expenses (such as, mortgage payment, loan payments, etc.), and then your variable expenses (such as, grocery shopping, entertainment, etc.). You should put an average expenditure for past few months against your variable expenses. This is the category where you can cut down your expenditure.
Compute how much you can save monthly:
Now, calculate your total expenses and deduct the amount from your income. Are you getting a positive figure? If yes, then you’ll be able to save the mentioned amount if you can follow your budget. However, you need to cut down your expenditure if you’re not getting a positive figure, that is, your expenses are more than your overall monthly income; or, if you want to increase your monthly savings.
Plan your expenditure realistically:
It is relatively easy to make a plan; but, it will be of no use if you cannot follow it. So, try to plan your budget as realistically as possible. It is true that you’ll have to make the extra effort to save more, but it shouldn’t curb your daily necessities.
Tips to stick to your budget
I feel that when you’re budgeting, “one size fits all” concept won’t work. Here are some tips to plan a budget which will fit you perfectly.
Plan a suitable budget:
First and foremost, you should plan a budget which will be easier for you to follow.
Plan short-term and long-term budget:
It is necessary to plan a short-term as well as a long-term budget. For example, plan a monthly and an annual budget. At the end of every month, check out your progress whether or not you’ll be able to meet your annual financial goal.
Revisit your budget plan:
It is very much necessary to revisit your plan at least after every three months. This will help you decide whether or not it’s working for you, and you can make modifications if needed.
Check your plan with others
There are some online budgeting tools where you can compare your budget plan with that of other community members.
So, you have now successfully climbed the first ladder of your financial management. Now, try to stick to it as much as possible and enjoy doing so.