Creating a balanced budget every month helps you achieve your savings goals and take care of your financial goals in the short and long run.
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Most of us have a limited amount of money and we cannot afford to spend beyond a certain limit. One of the best ways to keep a check on our spending is budgeting. Budget reminds us that we cannot cross the limit of our financial capacity. Also, it is advisable to spend as per our budget to avoid financial troubles later.
Creating a balanced budget every month ensures you distribute an equal amount of money to each of your key expenses. It helps you achieve your savings goals and take care of your financial goals in the short and long run.
Determine your income: Start by calculating your monthly income. This includes any salary or wages, side hustles, investments, or other sources of income.
Track your expenses: Keep a record of all your expenses for a month. This will give you an idea of where your money is going and help you identify areas where you can cut back.
Set financial goals: Decide on your financial goals for the month, such as saving for a vacation, paying off a debt, or building an emergency fund.
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Prioritise your expenses: After tracking your expenses, prioritize your needs and wants. Ensure that your essential expenses like rent, utilities, and food are covered before spending on non-essential items.
Create a budget plan: Create a budget plan that includes your income, expenses, and financial goals. Divide your expenses into categories like housing, transportation, food, and entertainment, and allocate a budget for each category.
Adhil Shetty, CEO, Bankbazaar.com, says, “A domestic budget is a financial map. It allows you to see where your money is and where it needs to go. Expenses can be essential or discretionary. You can survive without discretionary spends. But essential expenses are vital to your life. For example, paying rent or your loan EMIs is essential. Eating out or taking a holiday abroad are discretionary expenses. Efficient saving is about tightening essential spends and cutting down on discretionary ones, wherever possible.”
Reduce expenses: Look for ways to reduce your expenses, such as cutting back on eating out, shopping sales, or negotiating bills. Consider buying second-hand items and check for discounts or promo codes before making purchases.
Use cash or a debit card: Use cash or a debit card instead of credit cards to help you stay within your budget. It’s easy to overspend with a credit card, which can lead to debt.
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Set aside money for savings: Make it a priority to set aside money for savings each month. Even a small amount can add up over time.
Review and adjust your budget: Review your budget monthly and adjust it as needed. If you overspent in one category, see where you can cut back in another.
Stick to your budget: The most important step is to stick to your budget. Be disciplined and avoid overspending on non-essential items.
Remember that building a balanced budget takes time and effort, but it’s worth it for long-term financial stability.
