After we have made some good financial resolutions, it is now time to take a step forward and work towards making a ‘Budget’. Making a budget is basically estimating how much income is coming into our pockets and how different expenses are eating our hard earned money. As they say, you cannot get into shape without controlling your diet, you cannot accumulate savings without watching your expenses and budgeting precisely aims at that.
Here is simple steps to prepare your budget that will help you get financially fit:
- Decide to Prepare a Budget – The most important step to get financially fit is to sticking to a budget. Without knowing your expenses, you cannot really think to take control over the same. Since after reading the title of the post and still continuing with the post, Congratulations to you for continuing towards budget planning.
- Know How much You Earn – One must start with listing down the sources of his income and then compiling the amount that accrues as income from each source every month. For a salaried person, this is an easy exercise since fixed salary gets credited to the bank account on monthly basis, but for a professional or business person, the same may be gathered through an analysis of the bank statements.
- Know your spends – An individual can usually categorise his spends into mandatory spends and discretionary spends. Mandatory spends are those expenses which you have to pay each month without curtailing much of them e.g. house rent, phone bill, insurance expenses, interest on loans etc. Discretionary spends can basically be defined as spends at the discretion of the individual and these can normally be controlled by exercising certain financial wisdom.
- Compiling Expenses under Different Categories – Now that you have listed down the sources of money and kinds of expenses, the next step is to compile the expenses under various heads, especially discretionary spends to check the sources of leakages due to excessive spending. When you prepare such list, you will normally notice that you purchased an outfit last month which you have not yet worn, or you have been going much more frequently to movie halls than what your pocket allows.
Budgeting aims at setting a monthly ceiling on each type of expenses. It is just akin to asking yourself if you can go to a movie just a single time in a month or making clothing purchases only after you have saved 20% of the incomes. Set a cap on your discretionary spends and see if you’ve been able to balance your budget.
- Plan to Save in the Budget itself – If you intend to have save some amount monthly, which is indeed desirable and ideally should be 20% of the earnings, consider including it as your expenses. It is much easier to save if you’ve planned for it in the budget itself.
- Sticking to the Budget – The implementation of the budgetary plan is as important as the intent to prepare the budget. So, make sure that once you make a budget, you better stick to it or you may end up derailing your financial train off its track.
Well, my finances seem on the right track. What about you?
Check out the A2Z of Personal Finance here.
Well written :).
A budget At the end of every month is must.
The ways you explained relating to ‘budegt’ making are easy and superb.
Appreciate the piggy bank, it saves lots of money 🙂 without our knowledge .
And yes we should never spend more than Our “Budget”.
Hi Dixita, personal budgeting is indeed a must for good financial planning.
Stay tuned for more money tips. 🙂
monthly budget is one thing that makes spending hassle free, the tips are workable and very helpful
Hi Menaka, Glad that you liked the post.
Stay tuned for more money tips. 🙂
very insightful, the most important thing to follow.
I like the 20% thing. Hoping I can accomplish that.
Would it be possible for you to provide a sort of planning list/checklist/ planner template for deciding the budget. I have tried a number of apps but they all fail me or I fail them 😛
Hi Manpreet, I will try sharing some tips for deciding the budget in my later posts. Otherwise, every individual has its own budgetary allocations depending on lifestyle and incomes.
Stay tuned for more money tips. 🙂
Sticking to the budget!! That’s the whole issue… 🙂
A practical and useful theme!
Hi Archana, Glad that you liked the post.
Stay tuned for more money tips. 🙂
A personal budget shows your true financial position. If you don’t have a budget how can you see your spending compared to your income? This information is at the heart of the budget process. It has the power to help you realize whether you are living within your means or on borrowed funds. It can show you where your income goes and whether you are spending it wisely, or not. It also shows how much of your income is being used to pay off previous credit purchases.
Hi Romila, you have indeed presented some valuable insights into the budgeting process. Keep sharing and stay tuned.
Well compiled Simarjeet. These are tips one can easily follow with a little planning. Thanks for sharing. Cheers 🙂
@KalaRavi16 from
Relax-N-Rave
Hi KR. Glad that you liked the post. Just for record, the name is Simardeep. 🙂
Stay tuned for more money tips.
Mine too
Agree, it is all about carefully examining your incomings and outgoings and we don’t have to do it every month. Once we get a hang of it, we can follow a set routine.
Hi Alok. Glad that you liked the post. Certainly, budgeting seems an extra task in the beginning but slowly, it seeps into our lives effortlessly.
The key to success is the consistency.
Stay tuned for more money tips.
Liked the point which mentions planning to save within budget.
Nice informative article. Learning basics is fun
Hi Seeya, glad that you liked the post. Learning basics is certainly fun and once you learn to stick to the basics, managing money is more fun. 🙂
Stay tuned for more money tips.
A nicely written post. being a finance person I can easily relate and vouch for it. 🙂
Hi Rohan. Glad that you liked the post.
Hope that you find other posts useful too.
Such helpful post to everyone. We need to keep track of our expenses properly in order to be able to save some money.
Hi Reema, budgeting is certainly essential to keep check on the expenses and save money.
Stay tuned for more money tips.
Again, good advice. Regarding #3: This makes me think about how individuals define wants vs. needs. Often we categorize our wants as needs and that’s a problem when identifying expenditures. Glenda from
Evolving English Teacher
Hi Glenda,
Glad that you liked the post and certainly you hit the bull’s eye.
Stay tuned for more money tips.
This is such a helpful post for the ones who are earning and to those who are getting their pocket money as well. Brilliantly written.
Hi Ramya, budgeting is essentially learning to live within the meanss and no matter how small the earnings are, still managing to save for the future.
Stay tuned for more money tips.
good and interesting post. thanks for sharing.keep it up