Considering rising inflation, interest rates and limited income, budgeting is also very important for you. But if you haven’t considered your budget, you may face problems in the future. Following are some tips, which can be very helpful for you.
The economic condition of the country also affects you
The economic conditions of the country also affect your income and expenses. You just need to understand the basics. Inflationary situation, crude oil price, employment situation etc. Helps you a lot in preparing your budget. Simply put, you can’t afford to spend extra in today’s fast-rising inflation. Similarly, it is mandatory to be careful while changing jobs when employment opportunities are decreasing.
Understand the source of income well
It is important for you to have a good understanding of your income to help you budget. Often, if there is more than one source of income, we cannot calculate the correct idea of income. As a result we spend more than our total income. It puts financial strain on us. That’s why you should know how much money you are getting every month, how much you are spending and how much you are saving.
Fixed and variable costs
The expenses that we incur every month are called fixed expenses. For example, house rent, electricity bill, food and drink or transport expenses are covered. Whereas variable costs are those which are constantly increasing or decreasing. A good example is medical expenses. Some months your medical expenses may be zero and some months it may go up a lot. Therefore, it is very important to understand the difference between fixed and variable costs.
Savings top priority
Saving is just as important as spending. Firstly, your savings helps you in emergencies and secondly, it allows you to arrange money for big expenses in the future. Remember that the return on your savings should always be higher than the marginal inflation rate. Otherwise you will accumulate money, but its real value will decrease. Also if you want to save to buy a car after five years, your target amount should not be equal to the current value of the car. Because a car that costs Rs 5 lakh today will cost Rs 6-7 lakh in five years.
Be prepared for budget changes
A budget is created for your convenience. So you can change your spending plan if needed. For example, if you are saving to buy a car and meanwhile a good company has an IPO, you can invest in it. Similarly, even in the event of a sudden health emergency, you may be forced to spend money from your savings.