How to create Budget plan?

Budgeting is a process to plan your income and expenses over some time to get financial freedom and goals.

Its good to take an hour every month to go through the expenses made throughout to find better ways in managing money earned. This will allow you to cut unneccessary expenses or
atleast reduce the expense to minimum.

Lets start creating a budget:
First point is to have a single bank account for expenses. This will help you in analysing the expense better without any confusion. Same as income account as well.

Start with calculating the fixed expense like Rent, Mortage/Debt, Food, Travel, Entertainment and Others.
Also gather all the income after tax.

Start Budgeting

Lets begin the Budgetting:

Income per month:

Monthly net income: 50,000
Next, add up and itemize where your money is spent.

Rent+Electricity: 10,000 + 1000
Morgage: 8000
Internet+Phone: 1300
Food: 4000 (Do not include the expense of Food consumed outside of home – Include only Groceries + Gas)
Insurance: 1500(Including Health and Vehicle)
Medical expenses: 1000( For meication or doctor appointment)
Entertainment: 2500 (Movies, Netflix and other expense)
Outside Food Expense: 2800 (Restrarent, Coffee)
Other Expense: 3500( Clothing, Haircut, Auto-repair, Gym and others)

Total Expense: 35,600

Money Left Over(14,400) = ~29%.

Get Health Insurance

Unexpected expenses may occur. But if there are no doctor appointments or auto repairs – and fuel expenses are less than anticipated,
for example – that will help increase your savings for the month.

But if you can see, about 6500 can be saved if we try to avoid Entertainment and Outside food. This expense is about 13% of the total Income.
Sometime taking food from outside can be unavoidable but mostly these expense were made out of your laziness.

During covid, we can definetely tell that these expense got cut down and we would have saved 15-20% more compared to normal month.

Ultimate aim should be to make savings equal or great than 50% of your net income to attain financial freedom around 45 Years if the income if invested
in the right way.

When budgeting its possible we forget to check each expense, for instance Mortage or auto-increase. when analysing your saving accounts, you might have the payment
available to payback the whole annum. This will drastically reduce your interest payment.

According to survey, we spend 10% of the unneccessary expense is made on the evening of Holidays. We will try to spend money during our Holidays. So try to engage your time
in omething productive to lessen the expensive meanwhile increasing your skills.

Another survey result shows people spend 8% more in shopping while using Credit card instead of Money. So if you feel that its possible to cash instead of card,
it will help you in saving more. If not possible, try using Debit card instead of credit card. Using Credit card for cash backs or offers ultimately leads to more spending.

Building your App:
Dont worry, you dont need to be a developer. Save your monthly bank statement and open it using Excel. Try adding the monthly Excel consisting of 12 months in a same Excel.
It will makes you feel more responsible if you are monitoring the spending regularly.

Invest in Mutual Fund?

What should be your Ideal Budget:

40-50% as Savings.
30-35% for neccessary payments like Food, Rent and Medical expense
20-25% for Nice to have things like Auto, Clothings, Entertainment

8 tips to help you save in line with the 50-30-20 budget
Here are eight smart shopping tips that could help you better align your income and spending with the 50-30-20 budget.

  1. More affordable living space
    Maybe a place that is a little farther from work, if that would have more affordable rent, might be a good solution to look into.
    If possible, getting a roommate could cut your top expense in half. If you can sacrifice comfort and privacy, this might make a significant difference in your monthly budget.
  2. Consider a Passive Income or Extra Income:
    In digital world its not difficult to earn passively. Its definitely can help in making extra money but also can change in your career based on your interest.
    If you have tried creating a passive income, I would assure you that it will definitely make you at least 20% of your full time job. Learn Programming language to reskill
    I will provide your the methods for making Passive income in another blog.
  3. Shop for better Insurance:
    Now we have several options in web to search for best options of Insurance. Stop Over paying insurance.
    Use Insurance only for hedging the risk. Do not try or see insurance as investment. Most of our insurance payment were made thinking of investment.
    Stop those investment or at-least stop having new insurance thinking of Investment.
  4. Save on groceries
    Most of the spending on groceries were on foods that gets wasted. So think before buying whether that grocery will be consumed. Stop wasting grocery will help you
    minimising the spending on Groceries.
  5. Cut down on Entertainment:
    Avoid spending on Theatres and Live events and buy the digital platforms instead. Avoid spending on Television , since it wastes your time and make you more lazy.
    Its been 8 years since I have TV, it helped me in making myself more productive.
  6. Evaluate costs
    Think before you spend whether the product is worth it. This will definitely reduce the spending by 10% of unnecessary products.
  7. Sell Unwanted items:
    Try to sell unwanted items even it is 20 bucks. Why selling?
    Dont worry, I dont want you to make money by selling but it will help you understand that you dont lot of space. This will help you to have more affordable living space.
    Try selling the unwanted items.
  8. Repeat budget audit:
    Never stop auditing, practice of auditing will at-least save you 1000 bucks per month. I am assuring you that in 3-4 months you will see the results.

Happy with your budget method? Any doubts: Mail: [email protected]

Here are some tips to take your savings to the next level:

  1. Build your emergency savings fund:
    Make sure that you have atleast 3-4 months of your income should be available in a emergency fund.
    Have the emergency fund available in the saving account to have it to ready use.
  2. Save those extra paychecks
    Try to save money made from passive income into investing in yourselves to make more money from Passive income to become financial freedom.
  3. Plan for large expenses down the road
    In case of any large expense down the road, plan them. This will help you in not taking high interest debts.

Get Skills from Programming Language and Microsoft Office.

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