Managing Budget and Expenses

It was one of the question which i Came across on Quora - How do I develop a habit of managing expenses and budgeting?

Well answering this made me feel interesting as Management of Budget is one of the area in which I think I'm Best.

If you feel that you are too poor to budget then its not your budgeting skills you should question but the planning where you are lagging behind. That means the areas on which you choose to spend money on are not properly planned.

Managing Expenses

If you are not sure of your expenditure or how and where your money is going. Then refer to your monthly Bank Statements of past 5 Months. It will help you to get an idea of the areas on which you are spending much of your Money.

Whether you be a Student or an earning Person. Whatever Money you earn or have for a Month distribute in 3 Sections.

1. Necessary Expenses

2. Savings

3. Yourself, Family and Friends.

Suppose you earn 60k per month.

1. Necessary Expenses

Say you have 30k(Including EMI, insurances etc) for necessary expenses.

Now, What are the Necessary Expenses ?

The ones which are important for you to Survive. Such as - Rent, Grocery, EMI’s , Electricity, Food, Education etc.

As per Google - An individual's ordinary and necessary living expenses include rent, mortgage payments, utilities, maintenance, food, clothing, insurance (life, health and accident), taxes, installment payments, medical expenses, support expenses when the individual is legally responsible, and other miscellaneous expenses which the individual can establish as being ordinary and necessary.

Always Remember -

Spend less than you earn. Save for future Spendings.

2. Savings

So moving to the second part – Savings. You have 20k for Savings from your Salary.

I follow a very wonderful formula for Savings, I’m not sure if you have came across it. But would like to share here.

That means - For example you have 10k then rather than investing it in only one plan, invest it 3 or more different options.

GROW your Money by Investing

Your investment depends on your income sources and priorities set for a Month. So few suggestions are as follows:

• Open LIC’s , FD’s , RD’s - It will be savings for you and also will save the tax.

• Make Gold out of your Money – My Mom and my Sissy are my best savings modes. Whenever I have the extra money I give it to them my Mom makes Gold out of it or my Sis saves it.

• Invest in Good SIP and Mutual Funds - Research the best plans and then invest. Once you invest I would suggest you to not to look into it for 5-10 years. Bcoz the money in MF’s are meant to increase exponentially. So keeping your money for longer duration will always keep you in profits.

• Buy a Flat or invest in some Commercial Property - If you want to buy a Flat or invest in some Commercial Property then buy it and start to pay the EMI’s Unless you have any other responsibilities on you. Responsibilities can be anything say your Education, taking care of younger ones or any other Family Priorities. Flat or Commercial Property is just an example, You can start with investing little Money as well.

• Save Money in Other Bank Account - I would suggest to transfer little amount of Savings every month to the other Bank account, the one which you are not using. Or preserve it as a Cash in your Locker. This money should be kept for any Emergency Situation.

3. Yourself, Family and Friends.

Rest you have 10k for Yourself.

Live within your means, yes. Save for the future, yes. But never forget how to enjoy spending some of your money on the things you love.

This is the section where you need to be much aware of your spendings.

I would like to share few tips here-

• Avoid Emotional Spending - Before buying anything question yourself - Is it really needed ? Is it really Urgent ? I would suggest to Wait for 30 days before buying anything. After 30 days if you feel its still important then buy it.

• Avoid using Credit Cards - It puts in you bad habit of spending more than what you earn.

• Cook your food and Pack your Meals - Avoid eating out very frequently. Keep slots in a Month to have outside food. For Example - I allow myself 2–3 Meals a Month from outside.

• Mode of Payment - Cash - Use Cash rather than Gpay, Phonepay etc and Keep the track of the Cash flow. First I was of an opinion that it's better to online transfer mode but I have observed that I spend more even if its not necessary. For example - Suppose if shopkeeper shows me anything worth of 600rs saying it's the best. If I like it then I will buy it by paying by Gpay. But what if I carry only cash of 500rs then I will rethink if its really important that I should pay 600rs. Or else will ask him to show anything of 400rs. (Anyways control of Mind is sometimes necessary…)

• Track your expenses - Track your expenses and keep reviewing your bill statements every now and then.

• Use Splitwise - Splitwise is the app you can download it from Play store or Apple store. It is the easiest way to share expenses with friends and family and stop stressing about “who owes who.

• Never empty your Wallet completely - Always keep some amount in the wallet. Don't shop till the last penny in the wallet is over. Even elders say this thing.

• Gifting the family and friends on their special occassions and Donating - Its a personal choice though, but its upto you to keep this share or not.

I hope this will definitely help you enhance your budgeting Skills. Thanks for your question.

Happy Budgeting…Happy Savings..!!