Oh, my god! Is it necessary to plan a budget? This is the first reaction from majority of the people. Shiver courses down through the spine at the very utterance of ‘budget’. In reality, budget is a structured format of your weekly/monthly/annual expenses. You can keep track of where your money goes and distribute your earning in the best possible way. Let’s go straight to how you can prepare a budget more effectively.
Create a spreadsheet in your computer. If you like to go the traditional way, buy a paper file. Create columns and rows to list categories and corresponding expenses. The headings in the columns will reflect the categories of your monthly spending whereas the rows will contain the names of months.
The first few columns must be devoted to daily expenses like grocery bills and day-to-day travelling expenditure etc. The next few categories should be reserved for regular monthly expenses like electric bills, mortgage payment, car insurance, health insurance premium, tuition fees of your children and other must-pay categories.
A separate column should be created under the heading of ‘Miscellaneous’ or ‘Extras’. It is better if the column has sub-categories with suitable heading. Most of the miscellaneous expenditure includes unplanned and incidental spending. However, some expected yet irregular spending can also be placed under the heading. If you are to attend an upcoming wedding party or birthday celebration or marriage anniversary, then you are likely to buy gifts for the event. The expenses will be included into this added column. Unexpected expenses for medical treatment or other purposes should also be contained in this category.
Maintenance cost must also figure in your monthly budget. It is not that you have to pay for your maintenance bills month in and month out, still it is important to have a separate sub column under the ‘Miscellaneous’ or ‘Extras’ category. Car repairing, change of water pipe, electrical appliances replacements etc. go into this sub-category.
Do you donate to charitable organization? The amount donated for charity purpose must not be missed out in your budget. The idea behind preparing a budget is to keep a track of your every expense.
Are you a travel buff? Exploring the unexplored – is it sort of addiction for you? If yes, then you need to add another column which will have ‘travel’ in its heading. Input in the estimated cost you need to bear for annual excursion. Depending on where you are heading to, travelling cost may be a paltry figure or a tidy sum. Whatever the amount is, you must note it down on paper or input it in the virtual file.
Benefits of preparing a budget
The best benefit of preparing a budget is you can have a track of possible expenses in more structured format. Does your take-home income exceed the budget? Voila! That sounds really great. Don’t make a waste of the left-over; instead use it to pay off old debts or for an investment deal. But if the case is polar opposite, then you need to work on your budget once again. Curb out the impulsive expenditures so that you can effectively balance your budget.