How to set a simple Budget Planning 2017 ?:
Budget is a term which referred to, ‘A Sum of money allocated for a particular purpose ‘.
Annual Budget of a Government every year is an exciting one for everyone, but it’s a Pokey (Laggard) one for announcing their own personal budget. Before making (or) set a Budget plan, we have to understand why we need a Budget (or) Budget Planning ?
- It helps you keep your eye on the prize.
- It ensures you don’t spend money that you don’t have.
- It leads to a happy retirement.
- It helps you prepare for emergencies.
- It sheds light on bad spending habits.
- It’s better than counting sheep.
- Take / Open a New Notebook (or) Use Expense Manager App – Write down your Daily Income (Mostly Salary by month), Expenses and savings /Investing, if any.
- Calculate the Total at the end of month (Income, Expenses, Savings/Investing)
- Do it for the Next 3 Months.
- Now, you have a clear idea that you have a Personal Quarterly Financial Report(PQFR) 🙂 – Income, Expenses, Savings/Investing and Balance available if any.
- Track your individual objective expenses (Like Transportation, Food, Entertainment,etc), Income or Cash Flow, Savings/Investing for the last 3 month. And now set an Average expense price for every objective that what you had spent in the past. (Eg: Transportation – 1000/-, Entertainment – 1200/-, Eating out – 1000/- ,etc)
Set a Budget Planning:
- We are going to set a Budget Planning using Budget 50:30:20 Method.
- Calculate your Income / Salary / Cash flow after Deductions such as Taxes, Pension Contribution. – Now you have a Take Home pay
- Limit your Needs – Up to 50 % of your Take Home pay (Mandatory or Fixed Expenses)
- Limit your Wants – Up to 30% of your Take Home pay (Day-to-Day Expenses or Flexible expenses)
- Spend at least 20 % on Savings / Investing / Debt Repayments (Financial Plan,Loan)
2,40,000 / Year (or) ₹ 20,000 / monthly
- Mandatory (Fixed) Expenses: (₹ 10,200/-) – 51 % of his Net Salary
- Day-to-Day Spending (Flexible): (₹ 6000/-) – 30 % of his Net Salary
- Savings / Investing / Debt Repayments: (₹ 3800/-) – 19 % of his Net Salary
Budget Value Analysis:
- Take an average expenses, income, savings/investing/debt repayments for every objective
- Divide the Monthly Expenses, income, savings/investing/debt repayments by the monthly income /Cash flow
- Take the value of every objective.
- Some analysis for you…
If Mandatory Expenses plus Day-to-Day spending (MED) / Net Salary is,
- < 0.75 – Good and Great !
- > 0.75 < 0.85 – Be Cautious
- > 0.85 < 1.00 – Bad / Worst
- > 1.00 – You may Bankrupt 🙁
- > = 0.25 – Good and Great !
- < 0.25 > 0.10 – Try to increase the level
- < 0.10 – Your kid is awaiting for you / You may depend someone for your Retirement.