Budget your savings,
not just expenses
In our personal lives, we normally budget our expenses, but not our savings. That’s a mindset change that we need to bring about now. A budget is a plan for saving as well as spending. Here are a few quick tips that will help you maintain a budget and improve your cash flows.
Spend less than you earn: Thinking anything to the contrary seems blasphemous, but try saying this to today’s youngsters. For a start, make an estimate of your monthly expenses, and ensure that you keep a maximum of two months’ expenses in the bank.
Debit not Credit: An ex-colleague of mine once told me: “What you don’t have, you don’t spend.” If you did use only a debit card, you would not be able to swipe it for the new flat screen TV set you saw in the mall the last weekend.
Budget your savings: Instead of starting with a list of expenses (and all seem almost unavoidable, if you have the funds), ensure that you target, say, 30% or 50% of your monthly earnings as savings. Then ensure that this is invested immediately. It may even be prudent not to use your salary account for expenditure; transfer just the amount you need to spend to the other account through which your debit card is linked.
Review expenditure heads: There are certain unavoidable expenses such as house rent, school fees, and electricity bills. Then there are some which can be controlled like telephone bills, eating out and gifts. One of my clients actually has separate envelopes for eating out, petrol expenses and the like. If the family falls short on an eating-out budget, it goes to a South Indian fast food joint instead of the boutique Italian restaurant.
Don’t over-speculate: At the other end of the spectrum, there could be some of you who want to make every rupee earn the maximum it can. This obviously means lots more risk, and the possibility of losses. Take the example of an individual taking home Rs 30,000 per month, but spending Rs 25,000 per month. Instead of trying to invest the net savings of Rs 5,000 per month aggressively, this individual would get a 50% return by cutting his expenditure by only 10% (Rs 2,500 per month).
Original Author - Lovaii
Navlakhi CFP
MY COMMENTS –
I
fully agree by Lovaii Navlakhi. What he has written is just good for initial stage;
one should focus on Cash Flow Analysis or Personal Budgeting for that. Seeking help
from ethical professionals do help. It’s for the benefit of the masses &
classes.
Learn
the art of trusting honest & ethical people; if you don’t want to be sold
an orange for an apple.
