Hyderabad: You must strike a balance between these two - income and expenditure. While meeting your today's needs, future expenses should also be estimated. This is the principle that guides any budget - of a nation or an individual family. The Union Budget will be presented on February 1. It is time to take a look at the book of accounts and see what to do for your budget.
The impact of the Union Budget will be there directly or indirectly on every citizen. The budget is prepared based on a general principle of taking steps towards development and welfare. We have to keep this in mind while preparing out home budget too. First, think and set the overall family's financial goals before making the home budget?
Family budget
Write down all goals in the budget book. Mention short-term and long-term goals separately. Buying household items is a short term requirement. Buying a house and a car are medium term goals. Retirement, child marriage are long-term strategies. Once you get clarity on these things, you will understand what to do. The main reason for many financial problems is not knowing how to adjust the earned money for different objectives.
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Your household budget helps you to know how efficiently you can use your available financial resources to achieve your goals. Many people think that it is enough to save a certain amount every month. They consider it a good enough financial plan. This is actually a mistake. Apart from how much you are saving, you should know how much you need to invest to make your financial goal a reality. You should carefully plan to invest this amount.
Contingency fund
You never know when a problem will come. Hence, everyone must have a contingency fund. Make it a high priority in your family budget. Make sure that you always have enough money available for at least 6 months of expenses and instalments. This should be used only to meet expenses in unforeseen situations like jobless, mishap, etc.
Adequate allocations
The next thing to do after you set your goals is to count every penny you get. How is the flow of income? There should be an accurate calculation of how much goes towards expenses. Add up all the income you receive, such as salary, other income, interest, and return on investments. Estimate the annual income and monthly expenditure. Every three, six months or once a year, you might incur big expenses. Your should have adequate allocations.
Cost control
Every expenditure incurred by the family members should be accounted for. They should be reviewed every two months. Everyone should follow the principle of cost control. Those who do not have a fixed income should maintain two separate accounts for income and expenses. All the income should be deposited in one place and then some amount should be diverted to the expenditure account.
Financial future
Record of income and expenses should be like a guide for our financial future. Whether we are sticking to budget or not, we need to check from time to time. If there is any lapse, it will be known within one or two months. Have you calculated the income correctly? Are the cost estimates as expected? Such things should be analyzed. If the expenses are high, you will incur debts. Then, achieving financial goals may be difficult.
Luxuries and necessities
Most people don't care about money. I don't like to make calculations for income and expenses. They don't make distinction between luxuries and necessities. Have a pragmatic approach towards budget and think how much you can spend on your luxuries. Bear in mind such expenses should not derail your financial plan.
