5 no-nonsense steps to make personal budget which works

Common sense is very uncommon, goes an adage. When it comes to money, using common sense will help you more than anything else. Take for instance, if you struggle to save/ invest regularly, it is common sense that you need to budget your money. Execution is easy if proper planning is in place.

Managing money, is not a difficult task if you get your money planning or budgeting correct. To get this, you need to make a right budget. To help you with that, here are five steps.

Step 1: Know your family’s exact income. So it’s your salary, your spouse’s salary and any other income like a monthly rent from a household property and the like.

Step 2: Know how much you spend and where all you spend in a month. This means you will need to track your expenses. Knowing the compulsory fixed expenses such as loan EMIs is easy. But also track your daily expenses, utility expenses and life-style expenses

Step 3: Once you track your expenses, you will realise the area where you can actually save or even cut corners. It’s usually life-style expenses which you can control. Not much can be done about the home loan EMI, unless you switch the loan to another lender who charges a lower interest rates.

Step 4: The amount you manage to save, keep aside at least three months expenses aside as emergency funds. Once that’s done, start paying most expensive debt first, even as you keep aside a part of savings for investment purposes.

_Step 5:_Keep reviewing and tweaking the budget as your financial situation changes. So, if you get an increment, ensure that the increase in earnings goes towards savings and not life-style expenses.