Have you ever lost your way while travelling because you failed to notice the signposts on the road - or perhaps because there were none?
I bet a lot of you have experienced this at some point of time even in broad daylight.
But what if you followed along a GPS navigator? Your journey would be so much easier despite the unknown roads and uncertain weather, simply because you know you’re on the right track.
A household budget is like a financial navigator – it guides the way you make your household expenses, relating them to the income you expect to earn and the minimum savings you intend to earmark during a specific time period.
A Budget Planner will serve as your income and expenses roadmap – just feed in your budgeted (estimated) expenses and your actual expenses at the end of each time period that you choose.
Well done, if your actual net surplus is higher than your budgeted net surplus. And if it’s not – just motivate yourself to do better the next time.
Here’s how you can make the best use of a Budget Planner
• Categorise and make a list of your current monthly expenses.
• Separate the fixed expenses from the variable ones.
Fixed expenses are those that remain the same every period – rent, internet connection bills, bank loan repayments. Variables are those which fluctuate every month – groceries, entertainment, utilities’ bills and so on.
• Identify your incomes from all sources as well as any mortgage/ loans/ tax expenses or any other committed outflows.
• Identify the amount you MUST save every month.
Of course, the more you can save, the better – but most experts suggest that a minimum of 10-20% of your income must be set aside as savings.
• Analyse the areas of fixed and variable expenses in greater detail.
There’s perhaps not much you could do about your fixed expenses immediately but you could surely cut down in areas of variable expenses. Be ruthlessly stringent in your budgeting for your variable expenses.
• Allocate a definite permissible amount for spending in each areas of expense.
Richard Jenkins of MoneyCentral recommends that if you limit essential spending to 60 percent of total income, your savings will soar.
• For the specific period that you wish to monitor, feed in your estimated amounts – budgeted incomes and expenses in Dr Finance’s Budget Planner.
This will set the outer limits for your spending in each expense category.
• At the end of the time period, feed in the actual amounts that you’ve spent in each expense category.
• Now compare the actual amounts spent by you with the budgeted expenses. Determine if you have been able to really save what you ought to, in order to ensure a financially secured future.
• Revisit your budget every month.
If you’re struggling to keep your expenses under the budgeted amount despite keen efforts, then you may slightly raise your permissible limits in the concerned expense categories.
If you can easily save – raise the bar and give yourself a fresh challenge to spend lower than the newly allocated budget.
• Remember, the more money you save, the more you have to invest, the more your chances of increasing your net-worth in the truest sense.
LET ME KNOW : Did you find the suggestions useful? How has it helped alter your spending habits? Do write it in to share with your fellow readers.
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