First make a good budget…rest will follow!

“Whatever I do, my weight does not come down” and “Whatever I do I cannot reduce my expenses” – are commonly heard statements. If you are a doctor, a wealth guide, a financial planner, …you hear both of these statements. Normally people do not write down diligently what they earn, spend and invest. Similarly for reducing weight you need to maintain a food diary which will tell you what you eat…and then you can analyse the same.

Let us see what makes a good budget? In all the budget blunders exercies, the same few problems keep rearing their ugly heads. To avoid them, here are the important features of a successful budget.
1.    Categories that fit your personal situation and your families’ spending habits.
2.    Accurate income projections. Salaried individuals have it easy. In case of self-employed people – they tend to dramatically over/under estimate their incomes.
3.    Enough categories to give you a meaningful picture of where your money goes and where you might be able to cut costs, but not so much detail that tracking is a chore that you’ll soon give up. Breaking up of your medical expenses into doctors’ fees, and medicines is fine. But if you try further breaking up medical expenses into generic and branded – you might give up the whole exercise.
4.    Inclusion of expenses that don’t occur on a monthly basis, such as car maintenance, term life insurance premium, festival expenses, clothes buying, etc.
5.    Regular review of categories to determine if you need more or fewer, review of expenses, and brainstorming about ways to reduce costs in each category.
6.    Cash spending is a big leak in most budgets. Cash disappears quickly and if you don’t write down everything you spend it on, you will not have a clear picture of your spending.
7.    A minimum saving amount – at least till you build your emergency fund.
8.    Realistic written goals. Budgeting is about setting financial goals (saving for a down payment on a house, buying a new car, getting out of debt, saving for retirement, putting your kids through college, travelling, etc.) and finding ways to meet them.
9.    Identification of spending patterns you may not have been aware of when you weren’t tracking your spending.
10.    Most importantly, internal motivation and a positive attitude!

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3 Responses to “First make a good budget…rest will follow!”

  1. Cash spending is a big leak in most budgets!!!

    I outrightly and completely agree. Logging your expenses is a sound habit which select few have. Those who dont frown,ignore or reject it.

    A word of advice for such smarties, log your expenses!

  2. I have been using xpenserdotcom website to log expenses, both from the bank and cash. It is a simple site and very quick to enter expenses. You can use categories and get monthly reports very easily. The site is also updatable through the phone – which is a big convenience…

  3. […] Budgeting :   A nice article on Budgeting from PV Subramanyam […]

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