Great Ideas for Personal Budgeting
Every organization has a budget. Successful organizations around the world budget their money. And they do it because it works. But although making money and making a budget appear to go hand-in-hand, a report on personal income and outlays by the U.S. Department of Commerce found that for 2006, American households had a negative savings rate of around -1.0%, although it has increased since. Same in the case with Indians. It appears that the overwhelming majority of Indians does not have or correctly use a personal budget. Sticking to a personal budget will increase your financial health
Budget and Diet are terminologies that do not have positive connotations. These are activities which people resort to when people have some serious problems. Budget and a diet are both tools. If the tools are used properly, they lead to a desired outcome. Nobody dislikes the word “shovel”, even though the use of the shovel requires effort. People use a shovel to dig a hole. They use a diet to develop a healthy body, and they use a budget to develop a fiscally responsible lifestyle.. Instead of viewing the plan as restrictive, think about the things it allows you to buy. After all, a budget is nothing more than a plan for how you will spend your money.
People complain that they can’t create a budget because they don’t know exactly how much money they will earn in a given week. While it is true that workers earning an hourly wage or working on commission might not get the exact same rupee figure in each paycheck, the amount that you earn has much less to do with the basics of budgeting than the amount you spend. Instead of focusing on whether you earn enough each month, focus on your monthly spending. The question is simple: where does your money go. Regardless of how much you earn or when you earn it, everybody has fixed expenses, like house rent, loans, groceries, education, shopping, entertainment etc. If your expenses don’t add up to the amount of your monthly your next step should be to save the receipts for every purchase that you make next month and use them as the basis for creating additional categories or adjusting the numbers in the existing categories.
There are certain items which do not occur every month. These items are listed as variables for two reasons. The first reason is that these expenses vary from month to month. The second is that if you don’t have the money to cover these expenses, the expenses can be reduced or eliminated without too much difficulty. For example, if you’re out of money, the entertainment budget takes a hit and you stay home on Friday night, or you don’t buy those new shoes that you’ve been considering. Part of taking control of your money is learning how to exercise some discipline in your spending habits.
The income part is more or less or same for the majority of people, unless some very lucky person goes ans hit a jackpot. Take a look at your monthly income. How much are you bringing on your worst month. Compare that number to the amount that you are spending. Ideally, the income is larger than the output. If so, it’s time for a personal savings plan. In other words, don’t spend everything you earn – save some for yourself. If you are spending more than you are earning, it’s time to review your spending habits. Strategies to increase your income include getting a new higher paying job, getting a second job or finding a roommate to help you with expenses. Strategies to cut your expenses include eliminating impulse buys, which are a major expense for most people, and cutting out planned, but unnecessary, expenses.
Everybody needs money. Nearly everyone wishes for more money at some point. That said, all but the wealthiest among us are essentially living on a fixed income. In other words, you bring in a certain amount of money each month, and when it’s gone, it’s gone. Accepting that reality is the key to living a happier, wealthier life. Keep in mind that your creditors don’t work for free, so spending money that you don’t actually have is also incredibly expensive. Fortunately, getting your finances on track isn’t that difficult, and while there are spreadsheets and software programs designed to make the budgeting process faster and easier, all you really need is a piece of paper, a pencil and the desire to live within (or even below) your means.
You should also plan to set aside enough money to cover at least three months’ worth of your expenses in case of an emergency. Once that money is put away, you won’t need to rely on your credit cards should you lose your job or experience unforeseen expenses. Like every other recurring item in your budget, the emergency fund is something you fund one month at a time until you reach your goal.
A budget is really a great tool that can work to put your personal finances on the right track. If the most successful multi-million dollar companies must budget their spending, it makes sense that a typical household should have to control its expenses in a similar way. Budgeting your money need not be seen as a chore. After all, accepting the limits of your income is the best way to take control of your spending, live within your means and, ultimately, reach your financial goals.