Fresh out of college? Just started working? Is the excitement of getting a handsome salary that is completely at your disposal, a big pull? Of course. Every new earner goes through this phase. But after the initial euphoria dies down, the reality starts biting. Will I ever be able to save money? Is there a better way that can help me manage my budgets?
Managing monthly budgets is a problem most of us face. Even if people have been earning for years, managing a budget is always the sore spot.
Here are some basic yardsticks that can help you plan your monthly money in a more economical, planned and organised manner. And who knows, in the process, you may end up saving money too.
Create a budget –
Once you know the amount available to you at the end of the month, create a budget. An excel sheet always makes it more methodical. List down all the heads under which you spend. Take it down to the last insignificant one.
Divide into fixed heads (which happen without fail) and the non-fixed ones which may not happen as a monthly routine.
E.g. – rent, EMI’s, petrol, food, salaries to help at home, personal expenditure etc.
Always keep an amount for miscellaneous expenses. These are the emergency/not thought of expenses which you may come.
Analyse expense and income earned
Once you have listed down all the expenses, see how it adds up vis-a-vis the net salary earned.
Do you have any amount left? Is it a balance – what comes, goes out. The other important question will be – are there any heads which I can make a cut too so that the available money that is available at the end of the month is more than the present.
Prioritise expenses
This helps you to plan and list down what’s important and what is not so much. It curtails you from spending without thinking. It starts giving you a thought every time you open your wallet.
Write down your financial goals
Listing down your goals early on, will help you get into the habit of planning in advance. It helps you finalise a vision for an economical future. Do you want to be financially successful? It helps you bridge the present with the still to happen.
Also club your personal goals with this too. E.g. – you may have just started work but want to buy a high-end car after 4 years. If that’s the personal goal, then the plan to save and keep some money aside for it, has to start now. After 4 years, it wouldn’t be possible if you haven’t started now.
Expenses that can be curtailed
These are discretionary expenses that can be cut down if necessary. They happen but may not be essential.
If you feel, after writing down all your expenses, that the money left is negligible or in minus, then these are the costs that need curtailing. Only then will the in-hand money go up.
Some examples are – entertainment, restaurant eating, gifts, vacations, personal care and clothes. These can be adjusted or postponed if the need arises. List down and analyse as per your prerogative.
Reading your excel sheet
Once you have got everything in place and the first month has passed, analyse the net on the sheet.
If you get a positive number, it means you spend less than your expenditure. Time to think of how to use this money. Do you want to pay off a loan or buy something that’s a personal need or just let the balance be there? It could also be a good way to start investing in mutual funds or other financial plans.
If you break even, this means you are just about managing. One ad hoc cost or an emergency can make your entire balance sheet go haywire. Reconsider your costs again and make space for that extra cost.
If you get a negative number, this means you’re spending more money than you bring home. Relook your discretionary expenses. Spend less on these heads.
Budget planning is essential for a secure future. It doesn’t matter what is the amount you earn, it’s about how you spend it.
Have the knowledge of understanding your finances. Monitoring and adjusting as per the earnings is a good step to begin with.
Planning once isn’t the end. Revisit it every month to see if any changes need to be made. As your income goes up so do the expenses, hence re-analysing always helps.
The first month may be difficult (when you work on a budget) but once the merits start showing, it will become a way of life.