The process of managing money in a way that it balances your income and expenses is Budgeting. It deals with managing funds and finances in accordance with business or planning your expenses and savings for household. A budget is a must keeping in view the growing needs and rising prices of commodities.
It has been a difficult time during the pandemic for people to allocate their resources in the correct manner. Many lost their jobs leading to end of savings, minimal expenses (leading to reduction in tax collection) and more of supply than demand for products in the market. The economy was down and budgets failed. However the demand was more for medical and necessity items followed by hike in their prices therefore, being out of reach of the poor. Here arouse the need of funds and savings out of the government’s budget (previous years’) that were successful and well managed. They were used to provide necessities to the under-privileged during such difficult times. Not only the government but people who had sufficient amount in their bank accounts (the higher income households) to extend support, did their best to provide relief to the affected ones.
This signifies how proper budgeting can lead to betterment in the future.
Expenses should be kept lower than income in order to save some amount for contingencies or entertainment purposes, as per the situation and requirements.
People often get trapped in debt due to improper planning of their finances. More expenses, less income attracts the mind to tackle it through easy ways which is to take a loan. However the interests act as a load and gradually affect the mental health of a person trapped in them.
The focus should be on easy methods to tackle the problem of finance. Preparing budget plays a major role in it.
- Monitor your stable incomes and expenses thereby, to get an idea of your current financial status.
- Analyse your recent spending and start making your own plan. Following are the simple, useful steps to follow and get a perfect plan:
- Write up your income (monthly budget) and divide it into two sections namely, Expenses and Savings.
- Make place for permanent/ fixed expenses first.
- Keep a part from the remaining for your savings and then divide the rest between ‘other expenses’ that might not be compulsory or significant.
This plan would work for a standard budget but situations aren’t the same. There can be more fixed and important expenses than the amount of money in hand. Such cases require support through debt (loans). But it can be handled this time if you create a budget defining your limits of ‘extra-expenses’. Give priority to needs and sacrifice your wants to execute your plans and come out of the debts soon. Save money for investments. It helps in problem solving in future.
Similar is the case for businesses. Funds should be managed accordingly and investments be made to support future prospects of growth and development. Start-ups need to keep a check on their costs and take every possible step to reduce wastage, be it of money or human efforts, since it would ultimately affect the workings and may increase financial needs.
A budget helps allocate the essentials leaving no space for useless expenditures. Monitoring budget plans regularly would help achieve better each time you make one. The major requirement is sticking to it till the end.