Create a perfect budget in six simple steps

Every year on the 1st of February, the finance minister of India presents the union budget of India. The budget underlines the income and outcome of the government and how the government plans to meet the outcome needs for the financial year. But budgeting is not limited to the nation; every single person should have a proper budget plan.

But many people, especially the young, miss out on budgeting. The country’s worrying financial literacy levels of a mere 27% may be a reason. According to data from Trading Economics, the average household income of an individual in India is around Rs.19,200 per month. Without a financial budget, this could put people in a tough financial spot. Hence, this article discusses how one can build an ideal budget in just six steps.

Analyze what you earn

To begin with, you need to have a clear idea of how much you earn every month. This might be easier for individuals with only one source of income. But if you have multiple active or passive sources of income, you should add them to your monthly income.?

Ensure you only consider the income that is accessible to you.?

Plug the leaks

The next step is to analyze your expenses every month. A good way to do this is by recording your spending over a month before you begin budgeting. Things will become easier if you already keep a record of everything.?

This practice will help you identify unnecessary spending and cut them down.

Pay what you owe first

In the next step, you will allocate your income for your different expenses. You can divide the spending between wants and needs. Here, it is ideal to prioritize your debts.?

If you find it difficult to allocate your income, you may use a rule like the 50/30/20 rule. It says that you should allocate 50% of your income for needs, 30% for wants, and the rest 20% to pay back your debts or for investment.?

Set achievable goals

Goal setting is an important part of budgeting. Several studies have shown the positive effect goal setting has on better discipline.?

Your goals can be anything that positively affects your financial health, like the amount of money you invested or limiting your expenses to a minimum. Setting goals may also help you accelerate your progress.?

Keep aside for a rainy day

Often, what disrupts a budget are emergencies. Here, an emergency fund could come in handy. Unfortunately, according to an Economic Times report, only 56% of Indians have an emergency fund even after the pandemic.?

Hence, creating an emergency fund is important. You may allocate the same in your budget or save whatever you saved from your everyday expenses. This can help you follow your budget better, even during emergencies.?

Keep a close eye

Breaching a budget rule is thousand times easier than following one. Hence, keeping track of your spending is always important. This will help your budget be more fruitful.?

Personal budgeting is often the first step in keeping your finances healthy. The above pointers will help you create a budget but ensure you follow them and make changes as your income changes for better results.?

?Sticking to your budget will help you improve your financial health. Improving your credit score while you work on your budget would be the cherry on top.?FatakPay is a credit platform that can help you even if you don’t have a credit history. You can build your credit score by utilizing FatakPay’s credit facilities to fit bigger purchases into your budget while also ensuring your finances do not get derailed.?