The very basic principle of personal finance management starts with creating a budget. Budgeting is important for both household and corporate unit. However, in this article we will restrict our discussion to only household budget. With a budget chart manually maintained or developed through a software program, you can ensure a balance between income and expenditure. It will also encourage you to save more and make a good investment portfolio that will ensure your financial well being in future.
Let us now have a glance at the following 10 tips to plan a household budget.
Watch Your Daily Expenses
It is good if you make a habit of tracking your daily expenses. Some are in habit of checking their bank account every day before they go to bed. It just takes only 5-10 minutes but benefits you a lot. Compare how much you spent yesterday and whether it is possible to cut down expenses today.
Keep a Tab on Miscellaneous Categories
The best way to watch your spending habit is to create well defined categories in your budget book. The title of those categories must be self explanatory. Adding to miscellaneous section will make it difficult to track your expenses, leave alone taking control over them.
Create a Category for Special Occasion
There are several gift giving occasions like Mother’s Day, Father’s Day, Valentine’s Day, Christmas, Marriage Anniversaries, and Birthdays in a calendar year. So, it makes sense if you create a special category for such gift giving events so that you can easily track how much expenses are made for these purposes.
Know What Is Going Out
Every transaction must be recorded. Make entries what you are purchasing and how much money is going out there. Even if the transaction involves a petty amount, it must find a mention in your budget schedule otherwise, you will forget it as days go by. After budget is created, somebody must be there to maintain it. The person must ring a warning bell if you are found to be on the verge of exceeding the budget limit.
Never Take out a Loan to Payback Your Dues
It is a very common practice to borrow a loan for payout of old dues. But that often results into more debt burden because you have to pay more interest rate on composite loans. If you can’t find a way out of your current debt mess up, consult a debt counselor for advice. Some of them offer free advice.
Keep Yourself Aloof from Expensive Friends
If you mix up with friends who always dine out in expensive restaurants or splurges a lot, it is better to avoid them. Having such friends means you will adapt yourself to high living. The hitch is that for a middle class person, it refers to living beyond the means. This will never add to your saving but only accrue to your debts.
Pay Less on Interest
You feel like a rich guy after receiving your pay cheque but suddenly discover fund is exhausted just to pay your bills. It is better if you distribute the payment for bills evenly throughout the month. You will have almost same amount of hard cash in hand to spend for every pay cheque. This way, you can also avoid paying larger sum of interest.
Keep Yourself Busy Always
This is a qualitative measure to cut down expenses. Occupy yourself with more works so that you can hardly find time to overspend. Join a gym to stay in shape or find out another job to add to your earning. Just do something positive to remain stress free, healthy and obviously far away from frittering away of money.
Know Your Requirements
Before purchasing anything, you must assess how much useful it will be to you. Never buy anything just because discount is on offer or your colleagues or neighbors are buying it.
How to Live Within Your Means
Be organized, create budget and stick to it if everything works out fine. Be open to suggestions. Never be too sticky to your budget, you need to make changes if your financial goals and conditions require you to do so.