Some methods for setting up a budget for saving
Posted on: 02/Oct/2017 3:43:03 PM
It is a fact that we live in a period of more opportunities and more income. However, this has led to a corresponding increase in expenditures as well. This may create a deficit in the prepared budget. Especially, it may lead one to a very financially tight situation during the month ends. However, there are no ways to avoid these month-end expenses.
In order to avoid the above situation, the best way is to plan setting up a budget in detail. This will facilitate proper expenditure avoiding improper use of the income. This would be easier to follow as well.
Savings 1st
The best method to avoid the habit of spending quite liberally during the 1st half of the month and struggle during the 2nd half is - to reverse the budget-making steps: In other words, instead of jotting down the expenses 1st and then look for savings, do it in the reverse – Fix the savings 1st. Keep it aside. (This is known in the budget world as ‘paying the salary for yourself.
Expenses
15% - 20% of the income should be set aside for saving – exclusively for the future requirements. Now, use the balance for making the budget. Even in this, consider the important expenses 1st such as payment housing loan EMI, bills (telephone, electricity, internet, cellphone, cable TV, and groceries) and pay them.
Now, have a look at the balance left: keep this for expenses relating to entertainment, eating out, etc.
Follow strictly
It is just not enough to plan the budget properly as above: you have to follow it strictly as well. Give top priority to deposit the planned savings. Keep this initially in a savings account or recurring deposit account – once an appreciable amount accumulates, you may choose the appropriate investment avenues and deposit in them. You may also invest in SIP – Systematic Investment Plan. At the same time, consider the post-retirement situation as well.
Savings
Only the factor how you currently spend your income decides your future avenues and plans for expenses. Do not be led by the impression that with the present limited income, there is no scope for savings or just indulge in thinking that you may save only when you earn more. It is best to compulsorily start savings even with the present limited income. The budget planning explained above will facilitate this.
