Are your expenses going out of hand? Rein them in with what is known as the monthly budget. It will help you keep your expenses in check and improve your finances. After all, budgeting has long been seen as a cost control exercise in the corporate world by making attempts for matching actual costs to estimated costs. If we can incorporate this little corporate lesson in our life, no doubt we all can become great financial management experts ourselves.
It is a summary of your income and expenses which is made before your expenses have been incurred. Just like bookkeeping and accounting is a record of a transaction after it has been incurred and the analysis of how much money went where, the budget lays down just how much will be spent on what item at the start of the month.
It is split into two main parts: the income section and the expenses section. You may further sub-divide the expenses section under different heads such as home-related expenses, travel expenses, health expenses, entertainment expenses, etc. Then, in the particulars column of the template, list out the main heads under which the items are classified. The items are the heads of incomes and expenses.
The next very important step is to decide how much to spend on what. Allocate an amount to each of the expense heads based on your prediction, on how much you intend on spending under each expense head.
For a couple of months there are chances that you may be well off the mark because you have no idea about how much you spend. But, around the third month, you should be setting realistic targets for yourself, which make sure you curtail your expenses and increase your savings too.
Making the monthly budget plan takes hardly any time, but can be a good money spinner for you in the long run. Apart from the fact that you know where exactly you end up spending your money, the budget will also encourage you to save more money in the long run.
Sample Monthly Budget
|Other EMI payments|
|Food and Drink|
|Water and Sewer|
|Credit Card Bills|
|Savings (Total Income - Total Expenses)|
You can even make a business budget on the same lines. The bottom line here is that the monthly budget will help you save a lot of money in the long run, and improve your financial position. Hence you ought to make and follow a monthly budget regularly.