Neha is a class VIII student who has always dreamt of starting a venture of her own from a very young age. Though she was able to fulfill this goal, she is completely new to the concept of budgeting. Even though she referred to many sources, she was unable to get a clear picture of How to Set-up a Budget. Neha approached her elder sister Niya, who was employed since 2019 to learn about the concept of budgeting and how this concept can be applied in real life.
Imagine you are Niya. What according to you would be the best method to make Neha understand the concept of budgeting? Let’s take a look at how Niya explained this concept.
Well, the concept of budgeting is not rocket science like you think, and you need not be an expert in mathematics. So, let’s start with the definition of budgeting. As you’d have seen in many sources, “Budgeting is the process of creating a plan to spend your money and the spending plan is what we call a budget”.
Now, how do you think we can easily plan our budget?
The first and foremost thing you need to have clarity on while planning a budget is the income and expenses that are to be considered for creating one. This can include anything like household expenses, living costs, travel expenses, expenses incurred via leisure activities, etc.
Now, I’m sure you’ll be wondering about what not to include in this plan. Some of the common examples which I feel you can easily relate to in this category include usual, unnecessary expenses such as casual get-togethers, say with family/ friends that can happen now and then, purchase of expensive items to show off, excessive use of credit cards, keeping more than 2 credit cards, etc.
Savings play an important role in helping us lead a peaceful life. So how do you plan to create some savings?
Let me tell you what I’ve learned from my experience. The best thing to do is, to begin with, affordable amounts. Identifying your goals and list them on a priority basis. This will help you categorize them into short-term, mid-term, as well as long-term goals. Review your goals as well as savings at regular intervals. This will help you avoid defaulting and thereby save enough money to meet all your requirements.
And, have you ever thought about how to teach your children the concept of budgeting and its advantages?
Remember the time, papa gifted you a piggy bank? Well, I would say this is one of the best methods to teach children saving habits. Now imagine you want to educate your child on budgeting. What else do you think would work best? I would suggest you involve them in processes like calculating monthly income and expenses right from a very young age. Once they make it a habit, make them understand the difference between a want and a need and tell them exactly how much money you can set aside for leisure activities. That will help them have a strong understanding of how they can utilize their money for meeting all their needs.
And these days, it is not uncommon to see people looking at various options to invest in once they start earning a stable income. Ever thought about considering various investment options? If yes, here are some points you should be keeping in mind, as a beginner.
If you are new to the field of trading/ investing, you should be ideally starting with by reading articles related to the investment options available in the market. Once you get a clear picture of that, evaluate your financial status and the risk you can take. This will give you some idea of the investment option suitable for you. But, rather than just moving ahead by following your heart, I would suggest you talk to a Certified Investment Advisor. This will help you earn a good return on investment by keeping risks away.
So, now I hope you have a clear idea of what budgeting is and is ready to do budgeting on your own. As mentioned in the book ‘Undated Monthly Budget Planner Finance Diary – Budgeting Book for Tracking Spending, Controlling Debt and Organizing Your Personal and Household Finances’, “Budgeting isn’t about limiting yourself- It’s about making the things that excite you possible”.
Idea & Concept: Rajnikanth, AVP, Hedge School of Applied Economics
Content Development: Aswathi Satish, Niyog Consultancy Services Pvt. Ltd.