FTG / FINANCE / Budget, Budgeting
Budget, Budgeting | 09 Feb 2010

For some strange reason, people think shrinking pockets and backbreaking money control when they’re told to work out a budget.

For some strange reason, people think shrinking pockets and backbreaking money control when they’re told to work out a budget. But in literary terms, a budget is nothing more than a detailed breakdown of the inflow (income) and outflow (expenses) of your finances. By calculating a budget, you will actually be able to determine how much money you are able to spend and save. Some might find that they need to cut down on their expenses – too much outflow, we say – while others can do with a little more spending without feeling any guilt.

Have you ever bought something that you know you can’t really afford and then regret it later on? Or do you indiscriminately use your cards for purchases and get a rude shock when you receive your statement at the end of the month? Most of us would have similar experiences like this, and if you find that you’re continually caught in such a situation, your financial health is in trouble. By spending some time to sit down and work out your budget, you will save yourself a lot of unnecessary stress and headaches later on.

It’s not rocket science to work out a budget. The first thing you need to do is list down all the income that you receive. For most of us, all it takes is a look at our pay slip. For some you might have other sources of income from your shares, properties, other businesses or even from your partner. Consolidate all the gross income that you have, and you will know how much spending money you have every month.

Now that you know your inflow, it’s time to look at what goes out. Start off by listing down fixed expenses – bills, insurance, gym membership, rent, utility, car payment, allowance that you give to your parents and other monetary commitments you can’t run away from. Usually these expenses do not vary too much from month to month and shouldn’t be difficult to consolidate. Then comes the tougher part - your non-fixed expenses. This includes money that you spend on shopping, eating out, entertainment, groceries etc. Keep your receipts or take daily notes on what you spent on for the first 2-3 months, this will help you have a clearer picture of your spending habits.

With all this information on hand, you can now find out your bottom line. Just subtract your total monthly expenses from your total monthly income. If you have a positive number, congratulations! Your monthly cash flow is in the healthy region and you should take this chance to start paying off any credit card or personal debts that you have. If you are financially bulimic, don’t fret! All you have to do is take a close look at your expenses and cut back on those unnecessary spending. Check this space for tips on curing financial bulimia in the next article! Till then, take care of your pockets.

Article by Ash

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