A realistic budget is a real mastermind behind successful financial planning. To know more, check out this article.
Have you ever created a budget to manage your money and tried to follow it? If not, we’ll later on tell you how to create a realistic budget. But if yes, how did it turn out?
Following a budget can be tiresome. Especially when your terms 7 conditions are too unrealistic, it will most probably crumble down even before the end of a month.
So here is the first lesson- create a realistic budget.
By ‘realistic budget’ we mean the one which sets well with not just your income but also your spending habits.
A good saving plan is based on how you utilise your money. A careful spending habit that avoids any unnecessary expenditure is the first step towards an ideal budget.
With a budget, you can plan out a reliable emergency fund, start investing, and create enough wealth to sustain you after your retirement.
If you are a beginner, you must make it a habit to maintain a budget and stick to it.
You must have heard about the famous tip of waiting from 3 days to at least 1 week before making a hefty purchase.
In case you still feel the need, buy it. However, if your job is done even in its absence, congratulations, you saved yourself a good amount!
Now let’s see how your self-curated realistic budget works and helps you save money!
Working & Merits of a Realistic Budget:
1. Hit the Bull’s Eye - Get your Financial goals right at your feet!
The basic motivation behind setting a budget, apart from financial security, is your financial ambition. It can be anything.
From getting your favourite car to taking your first flight, you can achieve anything if you plan right for it.
A budget will simply give you a direction on where and how to start expanding your money.
Do this: write down your monthly salary and then list down the items in order of importance.
Beginning with the necessities, jot down all the possible things that you spend on in a month.
While doing this exercise, you will realise where a big chunk of your money goes. If lucky, those should be the necessary items like groceries, medicines, etc.
However, if a large amount goes into unnecessary items like frequent night-outs, you must reconsider your spending habits.
Now you know where to start- cut down on those unnecessary expenses and divert your money in the right direction. Start saving it.
Start investing and focus on expanding your portfolio!
2. Ensure not to Spend what you Don’t have!
Establishing control over your spending can’t be emphasised enough! Reckless expenditure is a termite for your financial health.
Spending on something that is too far from your budget is never a good idea. It is definitely disastrous for your financial health.
Remember that if you let your money flow in the wrong direction, it won’t bear you any fruitful results. Instead, what you do is diversify the areas where your money goes.
You start by making some secured investments like digital gold or FDs. Once the base is stable, you can try out some of the riskier ventures like mutual funds, equities, etc.
If you are a credit card user, make sure that you pay the dues on time and never let the balance accumulate.
Any reckless delay can bring you an inch closer to debt- which is definitely not a desirable situation.
Plus, if you can sustain with cash and debit cards, you can avoid credit cards completely. This depends on how well you manage the risk involved.
3. Retire Early with a Strong Financial Backup
A well planned and executed budget can promise you a happy retirement plan, if nothing else.
With everyone wishing to live life to the fullest without having to do too much work, the importance of investment plans has definitely skyrocketed.
But you can’t invest if you don’t save. And savings are impossible if you don’t manage a budget!
Instead of circling in this dangerous loop, you must create a budget that won’t let you down.
Begin with generating multiple sources of income, since a single one isn’t stable in today’s world. Next, start investing early and actively!
4. Get your Emergency Funds in-line
An emergency fund is simply your saviour during financially tough times.
An ideal emergency fund must be able to meet at least 3 to 6 months of your necessary expenses without any external help.
Life is unpredictable, and this mandates the creation of a reliable emergency fund. Your budget is the pioneer step towards its creation.
Once you have an idea of your spending, savings and investments, you can sneak out some money regularly to invest into an emergency fund.
If you have an inclination for traditional methods, you can consider investing in gold! Whatever you do, just make sure you have this cushion for rainy days.
5. Get a Hold of your Money - No more Sleepless Nights!
If you are one of those people who find it really difficult to get a hold of their money, a budget is something that you absolutely need.
Budget is not about getting stressed about that extra 100 Rs. that you spent on something or freaking out when you went out twice with your friends.
Instead, if you manage your money efficiently, you may not even have to give up on the things that you like.
With a budget, you can tackle all your bills and maintain sustainability for the future.
Budget has to be an essential component of your financial planning. If you can discover what fits best with your income and expenses, it can do wonders for your financial health.
Control your money and direct it towards expanding your financial portfolio. Once you've learned how to save, you must turn to gold, mutual funds, etc., to earn returns and secure your future.
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