Once salary credits to check in account, majority of us will pay the bills first and auto mandate can wipe our account.
In this way mid of the month we left with no money for our expense , this leads us to use credit card and you need to pay the bill next month and this cycle will continue.
What if you have money in your account at end of the month?
Recurring expense are the one which we need to take care by saving money each month. Are you capable enough to keep enough money to meet recurring expense? or you are using credit for this as well?
Most of us will think , if we earn more money we can easily come out from this cycle but earning more money won’t solve this issue.
The creative way to save money and take care recurring and monthly expense is budgeting.
Budgeting and law of nature
Budget is an estimation of income and expense over a specific period of time and it is re evaluated on periodic basis.
Budget is a most ignored topic in our life, but it does lot of good things and it creates good cash flow in your hand if you do it for yourself.
In this age of world , money can be taken from you easily in lot of ways that might be for entertainment , food and leisure etc.. If we don’t know where your money is going ,no can help us to save money.
Budget will give you the idea How much you want for your expense and How much much you can save?.
Non budgeter can only know their income and not their expense , so saving is not possible for them, where as budgeter can have idea How much they can able to save and spend along with their income.
There is a concept of subconscious mind, what your conscious mind will think again and again that will go to your subconscious mind and that will attract the same in your life. Nature will try to bring the things what your subconscious mind attracts.
The above is applicable for money and saving also. If you are doing budget then you are instructing your mind your income, saving and spending. In this way , if you want any additional money for any other things in your life through budget it will go to your conscious mind.
Keep on passing this information to conscious mind will register this in subconscious mind, nature will attract the money or nature will give the way to bring this money to your life. This is called law of nature.
If you are not getting the info how much money you want via budget , then that’s not nature’s work to bring it in your life. If you are lazy to do budget ,then nothing is going to change in your life and end of the month no money in your checking account will repeat without fail.
So if you want to come out from rat race, start budgeting today it is simple to start , easy to track once we will make this as habit.
Habit of budgeting
Science says any habit if you follow for 21 days will became routine in our life. The same is applicable for budget also. while starting it might feel difficult but if you see the result ,you will follow with out fail.
In my life now exercise ,budget, healthy eating all became part of life, since I am following this things from last few months I don’t want to put extra efforts for this.
Changing the habit or staying in current lazy level is up to you. You need to take the call on this.
Either inoculate budget habit in your life or stay in the middle class life and feel broke forever.
As a child we used to feel lazy for brushing in the morning , but now we won’t start our day with out brushing, this is because we are following this habit from long time in our life so we won’t feel we are putting some effort on this.
Initially preparing ,entering and tracking budget feels bore and we feel we need some extra time for this in our life, but trust me after 2-3 months you won’t sleep with out entering your spending of that day in your budget.
Budgeting is so easy to do , but our schools won’t teach anything about this.
Important terms in budget
Income ,expense and saving/investment are the important 3 terms in budget. which covers most of your money aspects in your life.
These terms applicable for all nevertheless you are employee, self employed , business person or an investor .
Income can be of any form of money that is coming to your pocket i.e. Monthly income , business income, returns from investment ,passive income from any means.
Without income we cannot justify our expense and saving. Pocket money from parents for college students is also considered as income only.
So it is not necessary to have job for income ,it can be inherited some times and some times it might borrowings.
But if we don’t know what is our income , then no one can help us to protect our money, interestingly majority of us know what is our income , this is because most of the time our income is from one or two sources.
Mostly we ignore expense part in our life as it is having more to fill and have more transactions compare to income.
Expenses will take money out from our pocket. Your monthly bills, EMI,Insurance payment, groceries etc.. all are expenses. Money you are spending for your need and wants is considered as expense.
We can broadly classify the expenses as 3 categories.
- Monthly Expense – Will spend each month e.g. Rents, bills etc..
- Recurring Expenses – Will save each month to spend for something e.g. School Fees or insurance payments
- Emergency Expense – Sudden expense due to unexpected situation
Needs vs Wants
In expense we need to know How much we are spending for needs and wants. Both can be part of monthly and recurring expense. e.g. Travel ,entertainment etc.. an all considered as expense for wants still it occupies our budget.
We cannot be strict with our budget and it is not for torturing ourselves. It is for enjoying the things we want along with allotting fund for all things in our life. So for wants also we need to allot budget and in my view it will give replenishment in our life.
So overall expense is not bad as it taking money from our pocket, but we should know How much is going for this.
Budget the expense with different categories and sub categories, as each and everyone’s wants and needs will differ, but all will come under budgeting.
Now we know How much is going to be our expenses ,next things is saving. Actually first thing in budget is saving , because you have to save before spending.
Majority of us will try to save money which is left after spending , but that’s is very difficult. We cannot able to save single penny if do in that way.
Saving = Income – Spending is wrong way
Spending = Income – Saving is the correct way
While doing budget, according to your goal you can save. You can compromise some part in your expense and you can save more.
Penny saved is penny earned
So all the money you are earning is not yours , only the money saved is yours , bill payment and EMI expenses are income to your banks and billers and not yours.
If you are not to saving money for yourself , you need to work till your death.
There are lot of way to save money and Budget is great way to start. Trust me without budget you cannot able to save properly.
You are earning 10k or 1 lakh per month that won’t make you wealthy , but saving and investment make you wealthy.
After saving habit comes in your life through budget, start investing. Saving in bank account will shrink your money due to inflation.
Inflation in India is 4-6 % on average so invest in instruments which will give more return than this.
You can save 50% of income or you can start with at least 5%, but start saving and budget will give you idea How much we can able to save.
If you have more expense you can reduce your saving percentage , but try to save that money you decided .
If you cannot able to visually anything, your subconscious mind won’t bring way to earn the money you want.
Simple way to keep money in while allotting budget is have 3 bank accounts
- Salary / Check in account
- Spend it account
- Save it account
Each month once your salary credited according to your budget transfer the money to each accounts ,so that you won’t touch the money for different things.
As per our psychology once money is allotted and separated in different account, our mind will think twice before spending that.
So don’t keep all your money in the same account and that will lead to poor spending habit as your seeing big numbers in the same place.
If you want to bring financial discipline ,close your credit card, this is applicable if you are not using it properly .i.e. end of the month due to cash crunch if you use credit cards, next month major part of income will go to credit card payment and this cycle will continue forever.
At least save 20% percent of the income so that you can attain financial freedom during your retirement life.
Please download the below excel and start your basic budget today.
Budget Excel : Click here to download
Additionally for budgeting and tracking of monthly and recurring expense you can use the app :isave money app