FINANCIAL ADVICE FOR SECURED LIFE
“BUDGETING IS A FIRST STEP TOWARDS FINANCIAL FREEDOM”.
Bankruptcy is something that has become so normal and frequent in today’s time. We could see a lot of bankrupt individuals and companies around us and even globally. This makes us think about how exactly a person turns bankrupt and why is it happening so frequently?
Do you think they can’t profit from their ideas, or can’t they earn enough to make expenses?
The answer is NO. The major reason behind every bankruptcy is Unaware of budgeting which means not being accountable for every cash flow within(Profit) and outside(expenses). Globally, the bankruptcy rate was 14% in 2020, and it’s expected to rise 26% in 2021.
| CASHFLOW
(Profit and Expenses) |
BUDGETING |
Reduced risk
Track the spending behavior |
| CASHFLOW
(Profit and Expenses) |
WITHOUT BUDGETING |
Unwanted expenses
High chance of bankruptcy |
IMPORTANCE OF BUDGETING:
How to manage your budget?
- Spend reasonably:
While budgeting, we realize the importance of savings. We save money before planning on fancy expenses. It makes us think about long-term financial plans.
- Tailing on how much and where we spent:
Individuals or any businesses start earning either exponentially or gradually. What they didn’t focus on is where their income goes. After budgeting, we focus on where and how much money we spent.
- Assess the spending manner:
The younger generation aspires to own a new car, electronic gadgets. It’s surely possible by availing of loans, but do we have a proper financial plan for the long term?
- Where our money(profit) goes.
It’s natural to have expenses once you start earning, but keeping track of and analyzing the spending behavior reduces the cost waste in the long term.
- Expenses are preceding over profit:
When expenses occur continuously, it’s an alert for bankruptcy. Here, we should focus on Unplanned expenses and increase income.
HOW TO CREATE AN EFFECTIVE BUDGET PLANNER:
Here, there are simple SIX steps to account for a budget:
- Note income and expenses list.
While bringing the concept of budget, the step after selecting the mode is listing out. Take note of the income and expenses list; not a number but the products. We can make this list by using the previous month’s expenses and income.
- Set income baseline.
Income baseline is the sense of calculating the net income value for step 1, which means previous pooling savings, passive incomes, and main income.
- Determine expenses
After listing expenses products in step 1, fixed expenses such as rent, dues, groceries, transportation, fees, etc.. + further new expenses). Calculate the value we spent on every product.
- Make plans for unplanned expenses.
When we are supposed to unexpectedly have medical issues in a family, it’s always worth saving money for that. It’s not an expense, it’s a form of savings, which should be always less than the actual savings.
- Categorize your income and expenses.
A separate column should be made to categorize income and expenses. For absolute beginners, we have attached an example below. After categorizing, calculate the net income and expenses.
- Compare and Determine the budget.
After comparing our income and expenses, we come to conclude in only two ways:
| CONDITION | REASONS | CONTROLLING MEASURES |
| INCOME(LOW)
EXPENSE(HIGH) |
Expenditures beyond the limits
Low Income |
Have thorough research on spending behavior to avoid unplanned expenses.
Focus on passive income ideas |
| INCOME(HIGH)
EXPENSES(LOW) |
Fewer expenses
Sustained income |
At least, 20% of the income should be left for savings.
If not, focus on reducing the unplanned expenses. |
BEGINNERS BUDGETING TIPS:
“Every extraordinary result requires ordinary and consistent efforts”.
We can start budgeting using,
- Paper and pen
- Spreadsheet
- Financial software
Here is an example of a Very simple and effective budget planner.
On the YouTube page, the work smarter, not harder he clearly explained how to use an excel spreadsheet for budgeting, and here is the link 🔗 below,
REGULATING THE BUDGET:
“SAVINGS FIRST, BILLS SECOND”.
- Before budgeting, we should analyze the priorities over luxury expenses. This would help us choose wisely and help us save more than we usually do.
- Budgeting is not tough, it saves us from getting into a stressful Life. If we work with the budget today, it will give us a bright and tension-free future.
- Budgeting makes us educated about money, and you keep on tracking the behavior of spending.
- We might have unexpected expenses such as family medical issues. So focusing on long-term savings might helps us to avoid succumbing to situations(RAINY DAY FUND)
- In the management book, “ALL YOUR WORTH”- The ultimate lifetime money plan by Senator Elizabeth Warren- she described the adoption of 50-30-20the
BENEFITS OF BUDGETING:
- Analyze needs over wants
It keeps an eye on every purchase we opt for. We must analyze everything before any purchase or spending. It should be seen whether the spending is a desire or a want. This makes us go for the best alternative ideas to cut the cost. Gradual cutting of cost waste makes us save in the long term.
- Reduce financial stress
We used to avoid signs of shortcomings, we only worry after results. The gradual process has several benefits in budgeting. It gives us information about future ideas of income and expenses.
- Educate us for long term goals and future plans
Fixed savings will make us think about long-term investment plans such as fixed deposits, post office savings, mutual funds etc. This would not only help us in our present time but also in the forthcoming future. Such deposits are useful on rainy days when we are short of income.
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