Budgeting, a habit that is rated very low since many do not follow it, is actually the best way to manage personal finances. We all are used to receiving the monthly pay on a fixed date and then spend it generously over the next 20 days of the month. The dwindling situation of the pocket comes to notice only in the last few days of the month and then we are left with no choice but patiently await the next pay day.
Here is how you can avoid being broke during the last days of the month by following some simple budgeting practices:
When you are approaching the last few days of a month make sure you budget all the mandatory expenses for the next month. This includes vegetables, groceries, meal/mess expenses (if you are a bachelor), electricity, rent/ home loan EMIs, newspaper, house help etc. These are the ones that eat up at least 30% of your salary. Once this is done you will automatically know your real income for the month that is available to spend elsewhere.
With an exponential boom in the online markets we are lured with an offer every hour. In such a situation it is very difficult to stay away from spending on some or the other deal. However if we think about it we hardly need to spend on these things. Obviously that does not mean you shouldn’t have some fun, but make sure you don’t over indulge. Hence make a choice between that trip, branded clothes, exotic dining and the like.
Spending on the mandatory expenses and other pleasures is unavoidable but in doing so one shouldn’t forget that maintaining a reserve balance for emergencies is also necessary. So make sure that at least 1-2 months salary is kept as a reserve at any given point in time. Plan your expenses accordingly.
Once the spending starts in the month you may actually spend money on things that were unplanned. Hence it makes sense to record expenses so that at month end you have an idea about where you spent the money and amounts that you might need to keep aside each month as ancillary expense items.
We live in a virtual world and using debit/credit cards everywhere we go is a norm. However in India having some cash on hand always helps. So make sure you save some money for this. The age old habit of saving money in a piggy bank may help here.
Make sure you use these hints to live a financially healthy life and be worry free!