subject: Budgeting Is All About Planning [print this page] Budgeting is a significant in our day to day life. If we properly plan and budget then we can live a more relaxed and tension free life. Before you start your budget you need to note down your expenses every month. Firstly divide your expenses into two parts. The first are your fixed expenses which include your monthly routine bill payments like utilities bills, credit card bills, your insurance premiums, etc. The other ones are the variable expenses which include your expenses on entertainment, travel or groceries, etc. Now, that you have made a list of your expenses you should compare the total amount spent with the total income you get. If it is less than the income you get, then you have enough money to plan for your emergency expenses like illness, accident or emergency travel. So, when there is an emergency requirement of funds you are not running short of money.
To plan you savings the usual methodology is as follows. The flexible expenses should amount around 10-15% of your income. As these expenses are controllable, you should always try to avoid unnecessary expenses always, so you dont run into a money crunch that is not needed.
Budgeting is also about concentrating on your savings. The savings have to be around 25-30% of your income. If you save around this much income, you are very less likely to run into any kind of money crunch. Saving money could be even in form of investing.
Now, even after all such expenses and savings you still have money, then you could spend them on luxury or things like eating out and fun activities. But, incase the vice versa case then you have manage you variable expenses properly.
You should also set up your long term and short term goals. The long term goals are very crucial because they include payment of your loans on housing and vehicles, etc. While short term goals are about saving money every month to avoid money crunches in emergency.
There are a few more points to be noted when you are creating a budget, rather precautions, to be precise. Never rely on windfalls which include revenue in for of year incentives on fests or even returns on tax payments. Try not taking your credit cards when you are going for entertainment purpose. If you take a credit card along its always tempting you to buy something or spend on something that is not required. Also, always spend on only your necessities. If it is not required to not indulge in unwanted stuff like shopping, etc.
