Happy New Year! Well, Happy New Financial Year a great time to have a look at your budget. If you do not have one, it is a great time to make a financial budget. If the Government of India makes it for April to March, you too can make it from April to March, right?
"Whatever I do, my weight does not come down" and "Whatever I do I cannot reduce my expenses" are commonly heard statements. If you are a doctor, a wealth guide, or a financial planner, you hear both. The common grief of a planner and a dietician are the same the client (patient) does not listen! The only way to prove that you listen is simple.
Just WRITE DOWN the plan and make it work. Normally people do not write down diligently what they earn, spend and invest.
Similarly, for reducing weight, you need to maintain a food diary which will tell you what you eat, and then you can analyse the same. There are many websites which can be used for planning your diet and many websites for planning your budget. Let us see what makes a good budget? In all the budget blunders, the same few problems keep rearing their ugly heads.
To avoid them, here are the salient features of a successful budget. Categories that fit your personal situation and your families’ spending habits. Accurate income projections. Salaried individuals have it easy. In case of self-employed people they tend to dramatically over/under estimate their incomes.
Enough categories to give you a meaningful picture of where your money goes and where you might be able to cut costs, but not so much detail that tracking is a chore that you'll soon give up. Breaking up of your medical expenses into doctors’ fees, and medicines is fine.
But if you try further breaking up medical expenses into generic and branded you might give up the whole exercise. Just say "pet expenses" do not try to break it into pet food, vet expenses, pet toys the breakup of small expenses into such detail is not worth its while.
Inclusion of expenses that don't occur on a monthly basis, such as car maintenance, term life insurance premium, festival expenses, clothes buying, etc. Regular review of categories to determine if you need more or fewer, review of expenses, and brainstorming about ways to reduce costs in each category.
Cash spending is a big leak in most budgets. Cash disappears quickly and if you don’t write down everything that you spend it on, you will not have a clear picture of your cash spending. A minimum saving amount - at least until you build your emergency fund. Realistic written goals.
Budgeting is about setting financial goals (saving for a down payment on a house, buying a new car, getting out of debt, saving for retirement, putting your kids through college, travelling, etc.) and finding ways to meet them. Identification of spending patterns you may not have been aware of when you weren’t tracking your spending habits. And, most importantly, internal motivation and a positive attitude!
(The author writes at www.subramoney.com and has authored the best seller 'Retire Rich - Invest C 40 a day')