Household Budget- Your Friend or Enemy ?

The first step to ensure that you have a smooth financial life is to have a workable monthly household budget and sticking to it.
Lot of people find it hard to make a budget in the first place and then follow the same. This exercise can help us in achieving our financial goals and staying debt free.

Here are some of the reasons why the budget is not working for you and how you can turn the tables around by making it work for you.

1. Unrealistic expectations : We expect too much out of a budget. We expect to change the things overnight , we expect to get away with our lavish spending habits and save large amount from the first month itself.

The solution here is to set realistic targets. start with making budget, monitor the expenses for few months and then gradually you will be able to cut down on unnecessary expenses and allocate that amount towards savings.

Also, be realistic about your spending habits. If you intend to change, then with the consistent analysing month on month will help you in this.

 2 . Lack of discipline : I come across lot of people who complaint about their expenses and nothing left for savings at the end of the month. If you are a big spender, you will find it difficult to control the outflow with very little or no one left for savings.

A good way is to automate savings on a fixed date every month like your EMI of loans. Most importantly put a target on every investment which is called financial goal. This will help you to save the required amount every month when you know your target figure  and eventually urge to spend more will be reduced.

 3 . No Goals : An easy way to justify your spending is that money is lying in bank account and you don’t need it immediately. Spending this money is the easiest way to lose the track of your budget.

If you have your goals in front of you- it can be your dream house, retirement, International vacation – it will be difficult to use this money on dispensable stuff.

The solution is identify your goals – Big and small. Put a figure to it and number of year required to achieve the goal. You will be able to calculate how much amount is required to be saved very month and it will be easy to resist the temptation to over spend when you are aware that you are doing so at the stake of your own future.

4. Family is not part of the budget : “If everyone is moving forward together, then success takes care of itself” . If the budget is made individually and spouse & kids are not in the loop, It is impossible to make it work. Kids when know that you are saving money for their higher education, can learn not to spend on things currently that they may not need but were only buying just because of the peer pressure.

Sit down and talk to the family what you are planning and how you intend to achieve it. The best way tp motivate them is to show what these savings can achieve – bigger house, bigger car , foreign education etc.

5. Inadequate Emergency Fund : One of the biggest stumbling block when you try to stick to a budget is dealing with eventualities for which you have made no provision or inadequate provision. Emergencies can be a medical emergency and you don’t have sufficient insurance, job loss or salary cut, immediate house repairs. These big expenses can make your budget go for a toss.

Before you start working on your budget, it is important to provide for emergency fund with is equal to at least 6 months’ of your household expenses. Also, make sure the adequate insurance is intact to take care of medical emergency.

I am sure the points here are relatable with most of the people of my generation at least. These are small baby steps which is actually the foundation of your financial life, stronger the budget – better chances that you will achieve your financial goals.

Happy budgeting and wishing you a happy Financial life 🙂

About the author: Gurleen Kaur Tikku is a Certified Financial Planner and devotes her time to her company www.hareepatti.com. She has done her Bachelors in Finance and Investment Analysis(BFIA) from College of Business Studies(CBS, Delhi) and MBA from IMT, Ghaziabad. She can be Contacted at [email protected]

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