You aren’t meant to be an expert in financial matters but nevertheless you need to know as much about money for it to give you a sense of independence and freedom. If you can get on board with that mentality, then you're ready to start building a personal budget that lets you splurge as well as save. If you think, budgeting your money means having to make tough, sometimes FOMO-inducing decisions, then here’s a step-by-step guide designed by Dipika Jaikishan, Co-Founder & COO of Basis, India’s financial services destination for women, powered by education and communities, to make the whole process easy for you. As long as you set achievable goals, pay attention to your expenses, and remember to take a deep breath every so often, you'll ace it. Let's do this thing!
“You need to create a budget that helps you save, allows you to splurge, and more importantly, one that ensures you don’t go over budget,” says Dipika. She lists down the different steps below:
1. What comes under the ‘must-do’ list?
When it comes to financial responsibilities, no one gets off the hook. We have our common fixed costs — bills to pay, personal obligations to meet, EMI’s on long-term loans, rent, utilities, groceries; and even credit card payments, insurance premiums, and fixed deposits, at times.
2. What comprises the ‘want-to-do’ list?
All work and no play, doesn’t hold good for anyone. Variable costs are those that we choose to spend when we let our hair down a little. Not to say that unexpected expenses will not arise due to loss, theft, illness, or sudden one-time purchases — but we’re hoping you have a rainy-day fund in place for that. Dipika suggests you jot down the things or the trips that you intend to spend on this year, estimated dates and the budget for the same. For instance, if you need to buy a phone worth Rs 50,000 in July, you need to start saving Rs 10,000 every month till then starting from February and so on. “While these are short term goals we’re talking about, the same logic can be applied to long-term goals as well! Obviously up the amount saved, if we’re talking larger spends,” says Deepika.
3. And finally, what’s on the ‘Do-not-forget’ list!
A. Keep strict accounts.
Buy a new book, keep an account of every rupee you spend.
Rule of thumb: Don’t hide anything (from yourself).
Write down every expense – whether you decided to spend on eating out, bought a new pair of high heels which you totally didn’t need, or even splurged on some expensive coffee over the office’s vending machine. “Sometimes, seeing where we spend – helps us cut back. Plus, if it makes you happy…it can't be that bad, or so they say. But remember, smaller expenses that seep into your account here and there, over time, compound into a lot,” says Deepika.
B. There’s always room to learn how to have a healthier relationship with money.
We don’t talk about money as often as we should. Talking about money in the context of what you’ve been doing right and what you could be doing better, provides a lot of room to understand your lifestyle requirements and your spending patterns.
Deepika gives a breakdown of what a properly-planned budget could look like:
➔ ₹ 1,00,000 monthly income
➔ ₹ 40,000 non-negotiable expenses
➔ ₹ 15,000 savings towards short-term goals
➔ ₹ 10,000 towards long-term goals
What’s left is ₹ 35,000 after accounting for non-negotiables and savings. This amount is what you should ideally utilize to maybe save a little more, explore new investment options, or even take your mom on that weekend getaway to relax and unwind.