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Journalism of Courage
Good control over your personal finances will help you achieve goals that you have set for yourself and cope with changes in your life. How can you achieve that? By having your own personal budget.
Let us say,you are interested in further education and wish to take a student loan. How will you accommodate this additional expense?
* The first step is to calculate your monthly income. Consider income from all sources including income from your investments – A
* Next,make a list of your monthly expenses. For example,if you are a salaried employee,list your routine expenses. Then think of any extraordinary expense that you may have to incur during the budgeted period,such as home improvement projects or purchasing a car – B
* It is a good idea to categorise your payments under different headings like daily living expenses,entertainment and vacation,health etc. This will give you a fair idea of how much you spend on different categories. It is easier to keep track and also control your expenses once you know how much portion of your earnings goes into each expense.
* Calculate the difference ( A – B = C ).
* The next step is to redraft your personal budget to include expenses related to the educational course you are planning to take – like interest and principal payment,course fee,expenses on tuition and books,loss of wages etc. If you still have a comfortable surplus of cash ( C ),you can finalise this budget. If not,consider the expenses that you can avoid and reconsider the amount of loan. Once you reach a bottom line that you are comfortable with,finalize your budget.
* When you decide the cash surplus/ deficit you will be comfortable with,you should also think of the percentage of income you would ideally like to save for your future. Think of short term as well as long term or retirement savings.
You may compile your budget into a spread sheet or use a physical book or diary. Alternatively,there are several free software available online for the taking.
Tips for a working budget
* Keep your working sheet as simple as possible and keep it clean. Each item and category should be clearly defined.
* Maintain budgets on a continuous basis. Ideally,one should have a monthly budget rolling into an annual budget. The annual budget should also be in line with the long-term budget.
* An important part of budgeting is keeping track of actual income and expenditure and calculating variances. If variances are beyond acceptable limits,then it is time to revisit your budget and make necessary changes.
Author is CEO,Bankbazaar.com
