How to manage Income and Expenses

One should manage income and expenses by creating a budget tracking spending, and making informed financial decisions.

WAYS TO MANAGE INCOME AND EXPENSES:

Create a Budget : Prepare a budget by outlining all sources of income(eg. salary, bonuses, rental income etc) and all categories of expenses(eg utilities bills, food expenses, entertainment). One must allocate a certain percentage of income to savings and investments regularly and be disciplined about it.

Prioritize Expenses: After preparing a budget, one should prioritize expenses so as to cover basic needs first. After that, one should think of wants and desires . Unnecessary or impulse based spending should be left if budget permits.

Build an Emergency Fund : Allocate money for an emergency fund to cover unexpected expenses or financial setbacks.

Invest for the Future: Set aside a specific portion of your income for investments, to meet your long-term financial goals.

Financial goals are targets to achieve specific financial objectives within a specified timeframe. By establishing clear financial goals, one can take control of  finances and work towards securing financial future.

SETTING FINANCIAL GOALS

A good financial goal should be SMART i.e Specific, Measurable, Achievable, Realistic and Time bound.

Specific : You need to know exactly what you want to achieve and when you want it.

Incorrect Approach: I need to set aside money for my grand daughter's birthday next year.

Correct Approach:   I need to set aside rs.1000/- for next ten months for the celebration next year.

Measurable: A goal should be measurable so that you know when you will achieve it.

Incorrect Approach: I will pay off most of my credit card dues soon.

Correct Approach : In the next six months, I will pay off all my credit bills in disciplined manner.

Achievable: Your goal should be within a reasonable reach.

Incorrect Approach: I will save money.

Correct Approach : I will save Rs. 48,000/- every year by setting aside Rs.4000/- every months.

Realistic: Your goals need to be based on available resources which you can achieve reasonably.

Incorrect Approach: By saving regularly, I will become a millionaire.

Correct Approach : By saving regularly, I will be debt free by January next year. If I continue saving regularly after clearing all my debt, by next December I will be saving the sufficient amount to fund six months of my living.

Time-Bond : Goals with timelines allow you to track your progress and encourage you to keep going until you reach your goal.

Incorrect Approach: I will save money for my daughter's marriage.

Correct Approach:  I will save Rs.1,00,000/- every year for next 10 years for my daughter's marriage.

BUDGETING

Budgeting is the process of creating a plan for how you will spend your money.

Budgeting helps you to gain a clear understanding of your financial situation by documenting all sources of income and expenses, control spending, saving money, paying off debt and work towards your financial goals.

Know how to SAVE, and what is NEEDS, WANT AND DESIRES?

Why save money?

   What is Saving? Saving  means setting aside of a certain portion of income to meet future financial requirements. Saving is what remains ...

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