The government’s Budget hit the bull’s eye, but has yours? 

Dear Reader,

It’s been over a week now, the Union Budget was announced by our Finance Minister.

The Focus was on key areas in the economy.

Honestly, what more could you ask for?

But like with most things in life, dear reader, people hype the Central Budget to unexpectedly high levels and there’s one thing you need to understand here:

The impact of the Union Budget on your wealth will always be short-term. 

However, what surely is long-term and has sustaining effects is your very own family budget.

The former is more rated and is of entertainment value for both the media & the masses whilst the latter is highly underrated, highly ignored, and of huge fundamental value.

Before anything, we need to talk about SPENDING

The Government has to spend. 

It spends on creating jobs, reviving businesses, expanding GDP, and a whole bunch of things. To be honest, at times, the Government spends way more than it earns.

And why not? 

There are lives dependent on the decisions that the Government makes and in times such as a pandemic it needs to spend to get the economy rolling.

But would the logic of ‘spending more than you earn’ work well for your budget? 

Well, certainly not.

Consistently spending more than you earn calls for trouble and is an easy way to accumulate debt. If you do not know where your money is being splashed out chances are that your ‘budget’ is not up to the mark to aid you financially.

In a bid to correct that we are here as usual to help you.

Let’s Get Started

The first thing you need to do is create your own balance sheet.

Wait, do I need my Chartered Accountant (CA)?

No, you don’t need your CA. It is pretty simple and can easily be done by you. 

The basic equation for a balance sheet as we know: Assets = Liabilities + Equity

Assets are things you own while liabilities are things you owe. Equity is nothing but your total net worth. Your net worth will tell you a whole lot about where you stand financially.

First off you need to calculate all your assets:

Then calculate all your liabilities:

Subtract your liabilities from your assets and the figure you get is your net worth. 

If the number you see is a positive one, many congratulations. You are on the right path to attain financial freedom.

If you see a negative number, there’s a lot you need to correct, and making a budget is a way to go about it.

The Right way to prepare your Budget

1) Track your spending: List down all your income and expenses as given below. Make sure you are considering every single rupee that comes in and goes out of your pocket.

Once you get done, subtract your income from expenses.

Now if you see a negative number, you are in a horrible state of affairs. A sudden job loss or a medical emergency could put you in deep trouble.

Cut down on unnecessary spending. You should be saving at least a minimum of 20% of your income.

2) Save first: There is a simple formula to help you to spend cautiously. 

Income – Saving = Expenses

Before spending, set aside 20% of your income. Save it for any goal you may have, whether retirement corpus or for your child’s education. Just remember, save first and then spend not vice versa, okay?

3) Set goals: Next up, set your financial goals. Short term, midterm, and long term according to what matters most. Long-term goals may include retirement, children’s education, etc. Midterm goals include saving for a down payment of a car and short term goals could include saving for a vacation, any gadget, etc

4) Pay off debt:  Excluding home loans, note down all your debts (including credit cards). Pay off your high-interest rate debts first. A happy life is equivalent to having less stress and cutting off debt helps a lot.

Apart from this a lot of things will bank on your spending habits. Can you cut down on those small things that give you a lot of happiness and are hard to part away from? 

Budgeting is not just jotting down a few things on a piece of paper and acting upon them. It is more about creating a lifestyle to provide financial security for you and your loved ones. Pretty much the same way the Government aims to do so for its citizens through the Union Budget 

You see, if you have a budget, you have clarity. You will be more responsible, you will know when you are overspending. Most importantly budgeting lays the foundation of becoming a good saver and ultimately a good investor

Until Next time

Share this blog with your friends on WhatsApp, Facebook, or LinkedIn

Need help with your finances?

 Feel free to get in touch with us. We will help you create a free financial plan that fit your financial goals. It's completely free.