Budgeting: Importance & tips to do it right

Budgeting: Importance & tips to do it right

Finance & Accounting

Sanchit Taksali

Sanchit Taksali

3 Jul 2019, 13:30 — 6 min read

Background: The Union Budget will be presented on July 5, 2019. After a resounding mandate, the country is eagerly awaiting the first budget by the re-elected government. A budget is defined as an estimate of income and expenditure for a set period of time. In the prelude to the national budget, financial planner, Sanchit Taksali of Investiture-Your Personal Financial Planner shares some personal budgeting tips.

 

Don’t tell me what you value; show me your budget and I’ll tell you what you value. –  Joe Biden

 

Have you ever come across a situation, where you thought have money in your pocket but in reality, you don’t have adequate funds to buy your desired items? Though today, we have credit cards/ postpaid facility (thanks to modern payment mechanisms) but do we really need to use credit option for items which are for one-time use?

A smart move is for you to make a budget like the government of every country does each year. Making a budget is simple, easy to learn and can be interesting too if the right budgeting tools are utilised.

 

Having a credit card is a good thing, only if you have sufficient liquidity/surplus available in hand to pay the cost in time or in a crunch situation. Now, it doesn’t mean that you can, keep 5-6 credit cards and spend money like a free bird. Remember, excess of anything is undesirable.

A smart move is for you to make a budget like the government of every country does each year. Making a budget is simple, easy to learn and can be interesting too if the right budgeting tools are utilised.

Also read: 6 tips to improve the financial health of your business

Before we discuss the tools, let’s explore what are the benefits of budgeting.

Benefits of budgeting

Most of us understand the term ‘budget’ i.e. an estimate of our income and expenditure (spending). And making a structured plan of such estimates is called budgeting.

Making a budget is not a one-time process, it is a regular method of tracking – what comes in and what goes out from the pocket. There are lots of benefits of budgeting which can save you from dicey spending. Listed below are some of these benefits.

Tracking tool
Most common and beneficial thing about budgeting is that it can help you in tracking your money flows i.e. where the money is going and where it is coming from. Recording your spending every month, can actually help in tracking all your year-end cash outflows and inflows.

Increase savings
When you know, where the expenses are coming from, then you are easily able to either control or avoid them. This helps in building a small corpus which leads to generation of piggy bank for another long-term savings.

Preparation tool for emergency needs
Requirement of funds at the time of money crunch shows the actual financial health. And at that time, credit is the last resort. But this situation can be easily avoided when you are regularly maintaining/following a budget. With budgeting, you have sufficient funds to spend at the time of unforeseen situations.

Helps in achieving goals
Budgeting is one of the key measures for goal achievement as it helps in reducing stress and controlling your extraneous expenses which further leads to savings for future goals.

Also read: Mantras for financial success

 

Budgeting provides many other direct/indirect benefits. Besides, benefits, what measures does one need to follow to keep on track with budget is an important consideration.

Budgeting tips to keep you on track

•  Start with zero at the beginning of every month. This leads to Income – Expenses = Zero Outgo. This reduces the panic of negative balance and motivates you for positive cash flows or zero-balance budget.

•  Don’t limit budget to personal budget, you may involve dependents or your spouse expenses in your budget. Family budgeting helps in building accountability towards sticking to the goal. It makes ‘Our Money’ from ‘My Money’ – a valuable lesson for money management.

•  Every month has different expenses (festivals or special family occasions), so consider each month as a new budget month and plan accordingly.

•  Prioritise your important needs first i.e. necessities items. And then plan for other consumable categories of items in the budget.

•  If you still face money crunch issues (negative budget), then try to trim out the expenses in a small step by step method thus, leads to savings for extra funds.

•  Use online/pre-installed budgeting tool to track all your income and expenses. This saves time and makes budgeting an interesting tool to save money.

If you are facing any budgeting issues, connect with me and I will be happy to help you come up with effective solutions.

 

Also read: Managing your business & finances: Some practical tips

Image courtesy: shutterstock.com 

 

To explore business opportunities, link with me by clicking on the 'Connect' button on my eBiz Card. 

 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.  

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Sanchit Taksali

Helping Individuals in making Financial Plans for their Goals. No Commission Only Fees.

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