The Fundamentals of Personal Finance - Managing Budget

It’s not about how much money we make, it’s always about how efficiently we can manage that money. When we talk about managing money, it means how to carefully create a budget that works to manage your finances as well as manage that budget so that your personal finance journey continues for a long way. I know budgeting seems to be a daunting task at first but trust me when you start making it a habit, it works like a charm and it becomes quite easy. Creating a budget is like the first step whereas managing a budget sticks with you throughout your financial journey and thus managing it well improves your financial journey. So let’s go through some of the effective budgeting tips so that you can start efficient budget management on your own.

It’s Important to stick to Budget

First and foremost, you have to make sure that you will stick to the budget diligently. There might be a number of goals you want to achieve in your life and to achieve most of them you have to budget your income, expenses and savings so that you have healthy financial discipline. You have learned budget optimisation for financial goals and that will come from practice.

For efficient budget management, you’ll need to do five things.

1. Being Real
2. Track your Income and Expenses minutely
3. Use Technology to save more, such as money-saving apps.
4. Stick to cash, not credit cards
5. Budget to zero

Being Real

Being real is the first step towards managing your budget efficiently. There might be hundreds of goals which need money but the thing is we cannot save all our income for those goals right? This is where the budget comes into the picture where you have to be realistic and not be ambitious. So you have to be realistic about saving money for some of the top priority goals. You can push yourself to save more, but again you have to be realistic too and that’s the first step towards budget discipline.

Track your Income and Expenses minutely

To track your personal finance budget diligently you have to consider all your possible sources of income like salary, rental income, dividends etc. For family budget planning, you have to consider adding income from all family members. Now the task is to keep our expenses less than the salary we are getting.

Similarly, we have to track all our expenses and record everything we spend. Now after every month, you have to allocate money from the budget for savings and investments.

Use Technology to save more, such as money-saving apps.

Now once the income and expense are done, you need to use the technology to save more, apps like Paytm, and FreeCharge can help you to save some money while paying for any expense. Now why this is important in maintaining a budget because this can help you give some cushion to save more.

Stick to cash, not credit cards

Credit cards don’t help you to stick to your budget and the first thing you should do is to ditch that credit card. Credit Cards are like a motivation to spend more and thus once you ditch them, you will always remain within your budget. Credit Card is like using someone’s else money and thus you have to use real money i.e. cash or debit cards.

Budget to Zero

Budget to Zero simply means that all your money has a job. Some money is spent on expenses and some money left after the expense should be invested for your financial goals. This is nothing but Zero-Based Budgeting where the leftover from income minus expense should be in Investment. This is the main purpose of the Budget where you can minimize the expense and increase the investment.

In this article, we’ve covered everything you need to know about managing a budget. Managing a budget is not easy but when you continuously do it you will become better at it. You have to do a budget review, budget adjustment and budget optimization as per your needs and situation to make the most out of it. But along with that, the main thing is to have budget discipline.

FAQs:

Some FAQs regarding managing the budget

How can you create a budget that works for you?

First, you need to create a budget and start managing it. Once you have the budget discipline, then you have to review your budget and then you have to adjust the budget accordingly. You can use the expense tracking apps to track all your expenses and then you have to allocate some money from your budget for savings and investments. Last but not least you have to do budget optimization for your financial goals.

What are some common budgeting mistakes to avoid?

Some of the common budgeting mistakes to avoid are :

1. Not setting financial goals
2. Setting unrealistic goals
3. Not accounting for irregular expenses
4. More expenses than income

How can you stick to your budget and avoid overspending?

To have a healthy financial journey you have to have to stick to your budget. You have to sort out the difference between the needs and wants. Whenever you are making a purchase, please check if it aligns with your financial goals, if not then it might be worth delaying it to avoid overspending.

Are there any useful tools or apps for budget management?

There are a number of useful tools or apps for budget management they are GoodBudget, Honeydue, Day-to-Day Expenses etc

How often should you review and adjust my budget?

You have to do Budget Reviews and Adjustments regularly, but the question is how often you should review or adjust your budget. A monthly review is the best option because you can plan accordingly and adjust as necessary.