Doyouplanhowmoneyisspentinyourhome?Hereareafewtipstochalkoutabudgetforyourhouseholdexpenses.Karthikworkedforamulti-nationalcompanyandearnedadecentsalary.Still,hiswifeMeenaalwayscomplainedaboutthemoneyrunningoutbeforethenextpaycheckcamein.Whenthecoupleapproachedafinancialconsultantforadviceontheirinvestments,thefirstquestionheaskedthemwaswhattheirmonthlybudgetwas.KarthikandMeenahadnoanswer.Theyhadjustneverthoughtofneedingabudget.Mosthouseholdsdonothaveabudgetplan.Themoneyearnedisspentasrequiredwithoutreallykeepingtrackofit.Ifaskedwherethemoneyisgoing,thereplywillbefood,clothes,rent,fees,etc.Yet,planningabudgetforfamilyexpensescangoalongwaytowardsactuallysavingyourfamilysomemoneyeachmonth.Hereisawaytogetstarted.InthisarticleCheckYourCreditReportKeepRecordsHaveGoalsStartSmallConcentrateonEliminatingDebtCheckYourCreditReportNowadays,virtuallyeveryhouseholdhasacreditcard.Alongwithacreditcard,youalsohaveacreditreport,whichtracksyourcardhistory.Acreditreporthasinformationabouthowoftenyoupayyourbillsandifyouarefallingbehindonanypayments.Acreditreportalsodeterminesifyouareeligibleforaloan.Manyloanagencieslookatacreditreportwhentheydecidetogivealoan.Havingafavourablereportcanoftengetyoulowerinterestratesbecauseitprovesthatyouarecapableofmakingpaymentsontime.KeepRecordsHavingabudgetisnotonlyaboutspendingless.Itisalsoaboutknowingexactlyhowmuchyouarespending.Youmaysetasideafewthousandrupeesamonthtospendonfood.However,ifyoudonotcollectthereceipts,youdonotknowifyouaregoingoverthelimit.Everytimeyougogroceryshopping,savethereceipts.Also,collectbillsforhousemaintenance,electricityandwatercharges,etc.Afterafewmonths,calculatetheaverageamountyouspendoneachservice.Accordinglyyoucanthenadjusttheamountyouallocateeachmonthforthem.HaveGoalsPlanningabudgetismucheasiertodowhenyouhaveaspecificpurposeinmind.Havingatargetencouragesyoutosavemorethanifyousimplyseehowmuchmoneyisleftoverattheendofthemonth.Forexample,youcandecideonasix-monthbudgettosavemoneyforyouryearlyholiday.Chooseatargetthathassomemeaningfortheentirefamily.Thiswillgiveeachfamilymembersomeincentivetoworktowardsthegoal.Inaddition,chooseagoalthatiseasilyattainableatfirst.Otherwise,youwillnotachieveitanditwillonlydiscourageyoufromfurtherattempts.StartSmallManypeopleshyawayfrombudgetsbecausetheyareintimidated.Theideaofcuttingdownexpensesseemstoorestrictive.Abudgetevokesvisionsoflimitedspendingandmissingoutonfunactivities,tosavemoney.Nothingcouldbefurtherfromthetruth.Themoreeffectiveyourbudget,themoremoneyyoucandevotetopayingforthoseactivitiesthatmakeyouhappy.Forexample,themoneyyousavecanbeusedfortheoccasionalmovieorfamilydinneratarestaurant.ConcentrateonEliminatingDebtMosthouseholdshavesomeformofloanstopayoff.Thisincludeshomeloans,vehicleloans,educationloans,etc.Anyloanpaymentsyoumakeshouldalsobepartofyourbudgetplan.Putawaysomemoneyeverymonthinacontingencyfund.Thisactsasabufferifyouareunabletomakeyourloanpaymentsforanyreason.Italsopreventsanypenaltyfrombeingaddedtoyourloanamountforfailuretopayyourmonthlyinstalment.Ultimately,planningabudgetisallaboutchoice.Abudgetisareflectionofthosethingswhichareimportanttoyourfamily.Whileanexpertcanpointyouintherightdirection,itisyouwhohavetotakethefinaldecisiononthefinances.
Do you plan how money is spent in your home? Here are a few tips to chalk out a budget for your household expenses. Karthik worked for a multi-national company and earned a decent salary. Still, his wife Meena always complained about the money running out before the next paycheck came in. When the couple approached a financial consultant for advice on their investments, the first question he asked them was what their monthly
budget was. Karthik and Meena had no answer. They had just never thought of needing a budget.
Most households do not have a budget plan. The money earned is spent as required without really keeping track of it. If asked where the money is going, the reply will be food, clothes, rent, fees, etc. Yet, planning a budget for family expenses can go a long way towards actually saving your family some money each month. Here is a way to get started.
Check Your Credit Report
Nowadays, virtually every household has a credit card. Along with a credit card, you also have a credit report, which tracks your card history. A credit report has information about how often you pay your bills and if you are falling behind on any
payments. A credit report also determines if you are eligible for a loan. Many loan agencies look at a credit report when they decide to give a loan. Having a favourable report can often get you lower interest rates because it proves that you are capable of making payments on time.
Keep Records
Having a budget is not only about spending less. It is also about knowing exactly how much you are
spending. You may set aside a few thousand rupees a month to spend on food. However, if you do not collect the receipts, you do not know if you are going over the limit. Every time you go grocery shopping, save the receipts. Also, collect bills for house maintenance, electricity and water charges, etc. After a few months, calculate the average amount you spend on each service. Accordingly you can then adjust the amount you allocate each month for them.
Have Goals
Planning a budget is much easier to do when you have a specific purpose in mind. Having a target encourages you to save more than if you simply see how much money is leftover at the end of the month. For example, you can decide on a six-month budget to save money for your yearly
holiday. Choose a target that has some meaning for the entire family. This will give each family member some incentive to work towards the goal. In addition, choose a goal that is easily attainable at first. Otherwise, you will not achieve it and it will only discourage you from further attempts.
Start Small
Many people shy away from budgets because they are intimidated. The idea of cutting down expenses seems too restrictive. A budget evokes visions of limited spending and missing out on fun activities, to save money. Nothing could be further from the truth. The more effective your budget, the more money you can devote to paying for those activities that make you happy. For example, the money you save can be used for the occasional movie or family dinner at a restaurant.
Concentrate on Eliminating Debt
Most households have some form of loans to pay off. This includes
home loans, vehicle loans, education loans, etc. Any loan payments you make should also be part of your budget plan. Put away some money every month in a contingency fund. This acts as a buffer if you are unable to make your loan payments for any reason. It also prevents any penalty from being added to your loan amount for failure to pay your monthly instalment.
Ultimately, planning a budget is all about choice. A budget is a reflection of those things which are important to your family. While an expert can point you in the right direction, it is you who have to take the final decision on the finances.
