6 Simple Steps to Help You Budget Like a Pro
We have all been in those month-end pits where we have found ourselves completely cash-strapped, just waiting desperately for that faint glimmer of hope in the form of the next paycheck. Or worse still, those unforgettable times when we got our earnings, and within what seemed like a jiffy, most of it was inexplicably gone!
Having a well-defined and all-round budget, and following it consistently will help you take better control of your expenses and savings, and ultimately, bring a new level of financial freedom into your life. And while admittedly, there is no such thing as the right budget, there are some good practices to help you along the way.
Budgeting Guidelines to Redefine Your Personal Finance Habits
- Determine Your Budget Cycle
First things first: Decide on the duration of your budget. For most, it will obviously be on a monthly basis. It is always good to have a clear-cut idea of the frequency of your inflows and outflows of money.
- Catalog Your Fixed Expenses
Where do you spend most of your income? The answer to this question will help you identify and segregate your indispensable expenses from the rest. These can include mortgage/rent, credit card bills, transportation, and insurance.
- Save 15-20% of Your Income for Future
The importance of this step can no way be overstated. You need to commit a certain portion of your money inflow, typically 15-20%, into a savings account. You may also consider spreading it across an array of diverse financial instruments. These savings will come in handy in emergencies, help you plan your retirement, and provide a general sense of financial security.
- Identify Variable Expenses
Next, you need to identify your variable expenses. These may include utility bills, expenses on outings, shopping, and entertainment. Try exercising stricter control over these if your budget seems constricted after paying off the fixed expenses and setting aside a portion for savings.
- Use Cash Wherever Possible
Despite seemingly counterintuitive, using cash for most transactions and daily purposes allows one to keep more effective tabs on their financial situation or UPI/ Net Banking rather than credit cards that charge high interests.
- Review Your Budget Periodically
In order to budget like a pro, you need to constantly review your previous budgets and identify areas for significant improvement. But make sure you keep room for some leisure and activities as this will ensure a positive outlook towards budgeting.
Budgeting is an evolving process and in the end, it is up to you (and no one else) to define what your budget looks like. This will mean ascertaining your lifestyle and understanding the trade-off it comes along with. Remember, budgeting is essentially all about balancing your priorities—the current ones with those you may have planned for the future.