Budgeting-Budgeting-Budgeting. It is the one word which is the bane of existence for all the debtors and financially insecure folks. We know it is hectic to turn anywhere for financial advice and just read the word budgeting. Budgeting is termed as the simplest way to get out of financial trouble. According to experts, you can save a major chunk of your earnings as well if you just budget correctly. Even our knowledge hub hosts multiple entries on why budgeting is necessary. While we are sure you get the gist, you might be a little lost as to how to effectively budget without living hand to mouth. The key points can be found easily on our knowledge hub, but this entry tells you in better detail just how to maintain and formulate a perfect budget.
For any self-respecting adult, a budget should not be a scary word. It should be a given when considering the care and maintenance of finances. Budgeting will only help you if you integrate it fully in your life. Don’t let it go out of hand with wasteful expenditures. Money is easier to track with a budget. Non-essential expenses can be pointed out in an instant and any wasteful expenses can be flagged and so you have a feeling of being financially insecure. The essential expenses are put into perspective and even those can be optimized by techniques like bulk-buying or bargain hunting. It is a rule of thumb that these essential expenses should not cost more than half of your total expenditures. This leaves room for emergency expenses and insurance payments.
The rest of the income should be divided up in the following pattern. 10-20% of your income should be designated for investments and future savings. This can include a retirement fund if your employer doesn’t have any arrangement in place or if you aren’t investing in a government-backed retirement scheme. A separate emergency fund of at least 10-15% of your remaining income is also a necessity that saves you from borrowing cash any time the need is dire.
Living below your means is also important when you have a budget in place. Avoid overspending and plan elegantly. This is the first step to financial independence and security.