- Date : 01/11/2021
- Read: 4 mins
Do you want to save money without compromising on the fun? Creating a domestic budget can help you save a huge chunk of money.
Drawing up a household budget is an excellent way to compartmentalise your paycheck and spend your money intelligently. It can also help you meet your debt payments on time. As a young investor, you should harness your agile mind into creating a simple but effective monthly budget. Here’s how you can go about it:
How to create a monthly budget
The first thing to do when creating a healthy budget is to analyse the monthly income you have. To determine and calculate this income, include salary, dividends, interest, rent, alimony, etc. These sources should have a post-tax consideration.
If you want to eliminate tax liability, assess the estimated tax amount and exclude it from the income. For example, if your salary is Rs 35,000 per month, make sure to deduct the 5% TDS from it while making your budget calculations.
1. Determine your monthly expenses
You might find the calculation of income easier than keeping track of the expenses incurred. So, how do you arrive at your monthly expenditure? Well, it’s easy to maintain an excel sheet for every month and record your daily expenses. Or you can keep a diary for the same. A dedicated expense tracker app will make things even simpler.
To keep the calculation effective, make sure to write down even the smallest of payments. For instance, you need to include the EMIs paid on your home loan and also the cost of a packet of biscuits that you bought to have with your evening tea.
Do not forget to calculate the monthly share of expenses that do not occur every month (such as some insurance premiums). Along with this, keep track of the bank statements but refrain from considering investments.
2. Calculate your monthly savings
Now that you have ascertained your monthly income and expenses, you can calculate the amount you can save. All you have to do is subtract the expenses from the income to arrive at your monthly savings. For example, if you earned Rs 35,000 this month and spent Rs 15,000 on rent and Rs 10,000 on food, your savings would be Rs 10,000.
Related: 7 Ways To Stay Within Your Budget When Eating Out
3. Create your monthly budget
The next step is to separate your needs from your wants. This is crucial if you are looking to maximise the cash flow. Have you heard of the 50-30-20 rule? This rule states that 50% of your net income should be spent on necessities. Then, 30% should be kept aside for your wants, and 20% for investing.
Being a young investor, you may need proper guidance. Investing at an early age will bring in significant ROI in the long run. People who have had jobs for 10-15 years understand the need for this rule and implement it in their daily lives.
Related: 50/20/30 Budget Rule Woman Can Apply In Her Daily Life
4. Track your budgeting success
Once you are done with the detailed analysis, make sure that the budget list contains your expenses, savings, and expected income. Based on this, you can clearly understand the amount you can invest. Planning will be beneficial for you as the years go by. You need to keep track of your budget regularly and dedicate some time to analyse it every month.
Why create a monthly budget?
Here are some reasons why you should have a household budget:
- Stops you from overspending
- Offers control on your income
- Aids you in attaining your financial goals
- Ensures peace of mind
- Helps you save and invest
Related: Stressed About Money? Here's How To Deal With Financial Anxiety
Last words
Does your bank statement hit rock-bottom at the end of each month? Wondering where your salary went? Wonder no more. Just follow the steps outlined in this article and create a monthly household budget. You will never be short of cash again!
Drawing up a household budget is an excellent way to compartmentalise your paycheck and spend your money intelligently. It can also help you meet your debt payments on time. As a young investor, you should harness your agile mind into creating a simple but effective monthly budget. Here’s how you can go about it:
How to create a monthly budget
The first thing to do when creating a healthy budget is to analyse the monthly income you have. To determine and calculate this income, include salary, dividends, interest, rent, alimony, etc. These sources should have a post-tax consideration.
If you want to eliminate tax liability, assess the estimated tax amount and exclude it from the income. For example, if your salary is Rs 35,000 per month, make sure to deduct the 5% TDS from it while making your budget calculations.
1. Determine your monthly expenses
You might find the calculation of income easier than keeping track of the expenses incurred. So, how do you arrive at your monthly expenditure? Well, it’s easy to maintain an excel sheet for every month and record your daily expenses. Or you can keep a diary for the same. A dedicated expense tracker app will make things even simpler.
To keep the calculation effective, make sure to write down even the smallest of payments. For instance, you need to include the EMIs paid on your home loan and also the cost of a packet of biscuits that you bought to have with your evening tea.
Do not forget to calculate the monthly share of expenses that do not occur every month (such as some insurance premiums). Along with this, keep track of the bank statements but refrain from considering investments.
2. Calculate your monthly savings
Now that you have ascertained your monthly income and expenses, you can calculate the amount you can save. All you have to do is subtract the expenses from the income to arrive at your monthly savings. For example, if you earned Rs 35,000 this month and spent Rs 15,000 on rent and Rs 10,000 on food, your savings would be Rs 10,000.
Related: 7 Ways To Stay Within Your Budget When Eating Out
3. Create your monthly budget
The next step is to separate your needs from your wants. This is crucial if you are looking to maximise the cash flow. Have you heard of the 50-30-20 rule? This rule states that 50% of your net income should be spent on necessities. Then, 30% should be kept aside for your wants, and 20% for investing.
Being a young investor, you may need proper guidance. Investing at an early age will bring in significant ROI in the long run. People who have had jobs for 10-15 years understand the need for this rule and implement it in their daily lives.
Related: 50/20/30 Budget Rule Woman Can Apply In Her Daily Life
4. Track your budgeting success
Once you are done with the detailed analysis, make sure that the budget list contains your expenses, savings, and expected income. Based on this, you can clearly understand the amount you can invest. Planning will be beneficial for you as the years go by. You need to keep track of your budget regularly and dedicate some time to analyse it every month.
Why create a monthly budget?
Here are some reasons why you should have a household budget:
- Stops you from overspending
- Offers control on your income
- Aids you in attaining your financial goals
- Ensures peace of mind
- Helps you save and invest
Related: Stressed About Money? Here's How To Deal With Financial Anxiety
Last words
Does your bank statement hit rock-bottom at the end of each month? Wondering where your salary went? Wonder no more. Just follow the steps outlined in this article and create a monthly household budget. You will never be short of cash again!
