Across the world, it is quite customary whereby the government presents the annual Budget for a country and as a part of budget announcements the prices of many essential commodities like petrol, diesel, cooking gas etc. normally go for an increase.
However, ‘BUDGET’ for many people is quite a dreadful word. Once they hear the sound of this word, it gives them a feeling that rates of so and so daily use items are going for a steep hike. Don’t be surprised, it is a fact with many ordinary customers. Though, it is easy to find the reason for such behavioural patterns on the part of some selected class of people.
But a close review of the word – ‘Budget’ would prove that sometimes we are a bit unfair by attaching such a negative connotation with it. In reality, the word ‘budget’ is not only important to any government of a country but even is equally important to every entity including a human being.
Therefore, before we delve further into this subject, it is important to understand the literal meaning of this wonderful word called – ‘Budget’.
One of its most accepted definitions states that “A budget is generally a list of all planned expenses and revenues; it is a plan for saving and spending”. In other terms, a budget is an organizational plan stated in monetary terms.
After going through this simple definition, don’t we now feel more attached to the word ‘Budget’, than was the case earlier? Is it not a fact that it touches our daily life, in one way or the other? We all know that both revenues, as well as expenses, are an integral part of our daily lifestyle.
Once we know the expected revenues, and corresponding impending expenses, the next step is to plan for a disciplined saving coupled with sensible spending. This is nothing but a budget.
So knowingly or unknowingly, we all deal with this exercise of preparing a budget in our fashion. The only hitch which I could foresee here is when most of us do not undertake the budget exercise formally.
This is because some of us are under the wrong notion that the preparation of any budget is the job of a qualified accountant.
This may be partly true if we are talking about the budget preparation for a big organization or any country’s budget, which may be slight of a complex nature.
But what I am referring to here is your monthly budget and I am sure its preparation is well within your reach without involving any rocket science per se.
To prepare your monthly budget, you simply need to know the details of your expected revenues/income and the corresponding spending that you intend to undertake during the month.
So first, start by recording your monthly income. Gather your income details from all possible sources and figure out how much money you can expect to make each month. Put this information on your budget sheet under the heading "Income."
Once you have recorded the income from all sources, the next logical step is to list the expected "Expenses" for a month. Figure out how much you regularly pay for things like rent/mortgage, utilities, fuel, phone, TV cable, internet access, etc.
You should also add in expenses on groceries by using recent shopping bills. Further, depending on your lifestyle, add the money that you intend to spend on various recreations.
While on expenses, don’t forget to record the monthly loan instalments, in case you are servicing any loan taken for a car, house or any other facility.
Add up all the numbers in your "Expenses" section and subtract this from the "Income." After this exercise, do you have any money left over? If you do, GREAT!
This is your extra money for whatever you like but under normal circumstances, such surplus money should invariably form part of your regular savings/investments.
If there is no leftover money for savings/investments, you need to rework your budget. Can you cut out some expenses from your recreation activities?
Or maybe reduce your grocery bill by controlling the purchases of some junk food items? These are the two easiest areas to cut money from.
If you are still over your income, you may need to rethink your strategy by re-scheduling the servicing of a loan or deferring the purchase of some non-essential items etc.
Despite your best efforts if you fail in identifying any expense which can be reduced, then this is also a warning signal for you that for God sake do not add any further loan to your portfolio.
Also under such circumstances, you continue to remain in a danger zone and concerted efforts should be made to reach a state when your monthly inflows [i.e. revenue/income] are higher than the outflows.
This can be achieved by continuous tracking of your budget on monthly basis. A professional approach to any budget tracking exercise is to explore the possibilities of cost containment, while also finding alternative ways to enhance one’s income. It makes perfect sense to do some small sacrifices today to make your tomorrow a better day.
Be ready for such sacrifices and the days are not very far when you will achieve positive results automatically.
Remember, a budget is the cornerstone of responsible financial planning. It shows exactly how much money you have and where it’s being spent. A budget can help you find ways to save money and plan for the future.
Every day, thousands of consumers face financial crises. These could have been caused by personal/family illness, or loss of job, but the most common cause is unnecessary spending caused due to lack of discipline.
You need to control your emotions and impulses that stimulate your desire to spend money recklessly. You should keep close track of what you spend every day.
Ask yourself "Do I need to buy this? Maybe I must carry the home-cooked food for my lunch in the office instead of eating out daily." Try to cut back on your "fixed" monthly expenses. In case of need, find ways to cut back on your personal care, hobbies and entertainment.
I am sure by continuous tracking of expenditures; you will know exactly where your money is going and how best it can be restructured.
A budget is designed to help a common man to gain control over his/her spending, and proper planning can help improve one’s financial situation.
So from here on, don’t be dreadful about this wonderful exercise called ‘budget’, rather make the best use of this tool to ensure that you always live in a safer zone while dealing with any kind of money matters.