Financial planning is very important in life to protect yourself and your family in the time of crises and fulfill your dreams. To secure yourself financially, it is important to learn the basic budgeting tips and streamline your day to day expenses. It doesn’t matter if you are a full-time working professional, freelancer, or an aspiring entrepreneur, you must streamline your expenses and do effective measures to manage your finances well.
There is a notion in the minds of the people that budgeting means restricting all your expenses and eliminating all the fun in your life. But in reality, it’s about understanding how much funds you have and how smartly you should plan to allocate those funds.
In this article, we will discuss the basic budgeting tips that will help you to create and maintain a budget.
Keep Tabs on Your Monthly Bills
Many people believe that creating a budget is a tedious financial exercise that is not required. They trust their memory power that they will remember everything and keep their finances in good order. But, it is important to understand how valuable a budget plan can be. Tracking and calculating your monthly bills will help you to organize your spendings and discover hidden cash flow problems. You will get to know where you are burning your cash and how you can meet your financial goals.
Create a budget and keep tabs on your monthly bills. Take a piece of paper and make two columns. Label those columns as ‘essential spends’ and ‘non-essential spends’. This simple step will automatically provide you a clear picture of your spendings and at the same time ease your budget creation process.
Maintain a Basic Online Spreadsheet
If you want to secure data of all your spendings in each month, you can create a basic online spreadsheet and categories of your spendings every month. You can review this sheet to review what were your extra expenditures in the previous month and spend accordingly in the current month. With an online spreadsheet, the best part is that you can track and record your spends on-the-go and organize everything.
Even if you are out for work or on a trip, you will have a budget in hand that will guide you on how much you should spend or up to what amount you can overspend. There will be times when you are ‘tempted to’ or ‘have to’ overspend. You can prioritize your spending and keep your budget on track.
Try Using Cash Whenever Possible
If you want to keep your spendings in control, the smartest but most underrated trick is to use cash instead of debit/credit cards or doing online transactions. Online transactions are easy for people as they don’t have to struggle to physically deal with the cash. By just swiping plastic in and out, we can purchase anything within a matter of seconds. Though we cannot ignore the convenience factor, the sad reality is that this ‘convenience’ cost us big.
With online transactions, we tend to ignore how much money we are spending. For example, the price difference between a T-shirt worth Rs. 200 and another one worth Rs. 399 doesn’t seem like much at the time of purchase. At the end of the day, these small differences bust your budget. To keep your daily spending under control, use cash instead of credit or debit cards. In this way, you can visualize how much money you are spending.
But wait, this doesn’t mean that you should avoid online offers and discounts. Utilize online offers, cashback, and discounts to save your hard-earned money. The whole idea is to maintain a balance between online offers and offline purchases to save your money.
Plan an Emergency Fund
Maintaining an emergency fund is imperative to stop adding to your debt when faced with any financial bump in life. An emergency fund helps you to cover the unforeseen or sudden expenses that you are less likely to budget for such as car repairs, medical emergencies, family weddings, and much more. Financial experts suggest that an emergency fund should have a liquid fund of at least six months of living expenses.
Especially when you are dependent on one source of income, you must focus on building a substantial emergency fund. This fund will also help you to overcome an unexpected job loss, business loss, or illness. Stay a step ahead and save for the unexpected expenses before they occur. It is also recommended to figure out an extra source of income so that you are always prepared to meet the sudden expenses.
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Determine Your Savings Goals
As you plan to save money, you must have saving goals to work towards! Your saving goals will give you a long term vision and motivate you to maintain your momentum. Determine your long-term as well as a short-term goal. The goal can be anything! For example, you may want to save money for your first international trip, buy a vehicle for a daily commute, or renovate your home in the next year.
Plan how much you can save for a down payment and what amount you want to set for monthly installments. Calculate how much money you will be left at the end of the month when you are done with your daily expense combined with monthly installments. Are you able to save money or not? Do your increased expenditures are taking a toll on your on-going investment plans? Consider these situations before you take any action.
Decide a timeline for achieving your goals and track your progress to stay motivated on your savings journey. Play online strategy games to earn extra and contribute to your saving goals.
Automate Your Savings Plan
As we have to manage too many irons in the fire, it is common to forget our investments and savings. In this case, you must automate your savings to keep your ‘savings game’ on track.
If you have enrolled yourself for a SIP or have to transfer funds to reach your RD goal amount in the long term, schedule automatic transfers from your bank account to your investment plans.
Automate your investment-related contributions every payday so that you can build your nest egg for future requirements. Automating deposits into different accounts ensures that you are saving for your future and not just dumping your money in bank accounts.
Understanding the power of compound interest will enable you to multiply your money in the long run.
Decide How Much You Want To Save & Spend
After determining your saving goals, determine how much you need to save for each goal. For example, if you want Rs. 5,00,000 for house down payment in the next 3 years, try to save Rs. 15,000 monthly. The more specific you can be about the accomplishment of each goal, the better are your chances to achieve it within time. Even if you don’t have a big goal right now, take a shortcut and try to save at least 25-30% of your income.
No matter if you are playing online multiplayer games like poker for real money or starting your new venture online to earn some extra bucks, you must proceed with a proper plan. Be specific about how much you want to spend and how much you are expecting to earn.
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Take Help of Finance & Budgeting Apps
Not only can you use your smartphone to keep up with the latest news and trends or connect with people around the world, but also to streamline our finances on the go. With just a few taps, you can create a reasonable monthly budget for yourself, receive investing tips, and transfer funds from one account to another.
With so many investment apps and easy bank offers these days, savings has become an easy process. You no longer have to stand in a queue to take financial advice from a bank officer and select a savings plan. With the right apps, you can easily manage your budget on the go and track your spending. A lot of budgeting apps enable you to plan your savings goals.
You will have a transparency of your financial status as you can track how much you are spending on eating out, your outstation vacations, groceries, and much more. Personal finance apps make you more selective in terms of how you are utilizing and saving your money.
Do follow these top budgeting tips to strengthen your financial standing and free yourself from the claws of unbearable debts and financial complications.
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