Importance of Budgeting

Budgeting is the process of creating a plan to spend your money. The spending plan is called a budget. It is simply balancing your expenses with your income. A household budget is important because it teaches members of the family the worth of money. The younger members of the family come to know the importance of money, so that they stop wasting money on unnecessary things.

·         Through budgeting you have control over your money – If you have been wondering where all money goes, then a budget is for you. It gives you control over your money, you can decide where will it go and how it will be spent.

·         Get to have fun without guilt – It allows you to have fun, go out with friends or whatever you want without feeling guilty. As it is already planned through your budget.

·         Plan for the future – You will get to plan your long-term and short-term goals and make the path to them.

·         Actually save money – You will be able to see how much you have left and will be able to save extra. You get to save for emergency, vacations, vehicle and house maintenance, property taxes and anything else that doesn’t come up every month.

·         Cut expenses – One benefit of budgeting is to know what you are spending money on and where you should cut back. When you write it all, you will see if you should cut back on clothing, eating out, fast food, cable, or your cell phone bill, etc.

·         People who lose sleep on financial issues like worrying about how they will pay the bills are allowing their money to control them. Take back the control. When you budget your money wisely, you will never lose sleep over financial issues.

·         The first step in budgeting is to write down the various sources of your income. This includes salary (the amount you actually get in hand after deduction of tax, provident fund etc), rent, interest on deposits, dividends etc. Then make a list of expenses incurred in a month and allocate money to different heads like travel, food, salary for maids, school fees (if you have kids), EMI’s of any kind. Also write down any premiums for insurance and medi-claim etc. Keep refining your spends further categorize in travel expense, outings, eating food out etc.

·         Set financial goals – It will give you a plan and help you prioritize what’s important to you, instead of just going about your normal day-to-day spending.

·         The basic rule is to divide after-tax income, spending 50% on needs and 30% on wants while allocating 20% to savings.

·         Implement, monitor and adjust your budget.

·         The first couple of months of budgeting can be rough. Just know that nothing has gone wrong. This is totally okay. If you stick with it, you will be successful (and it will be worth it).

So now you know why and how to make your budget according to your goals. I would urge all of you to start budgeting if not already doing it to make your life easy and in control.

                                                   Happy Saving !