A new acquisition may bring you joy. On the other hand, thinking about your monthly budget may give you anxiety. Don’t worry, you are not the only one. In this article we will discuss steps that will help you navigate through your budget plan. So, let’s get started.
Benefits of budgeting?
Don’t make it sound like a strict diet plan that you hate to stick to. Most of us compare budgeting with lifting weights in the gym, but it is not like that. Actually, it can be more fun. Think of your budget as a screen that will give you the complete picture of your finances. It is designed to check your unwanted spending and maximize your savings.
Consider budgeting to be a guide that assists you in understanding your spending habits and where you can save money.
Step 1: Calculate your monthly income
The first step towards budgeting starts with calculating your monthly income. Your monthly income is the total amount of money you take home post-tax deduction from your paycheck. Don’t forget to include anything you receive as a side income.
Step 2: Calculate your monthly fixed expenses
Monthly fixed expenses are recurring expenses that you have to deal with every month. Expenses like your rent, EMI, and credit card bills. These expenses are your priority. Even though costs such as monthly grocery and travel charges may change, you can still add them to the fixed expense list.
Next, you have to subtract the monthly fixed expenses from your monthly income. The remaining amount is what you have to spend on shopping, takeaway orders, and other things. You can even make a plan and start saving a small chunk of money from this left over to meet your goal.
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Step 3: Track you spending
This is the time to be honest with yourself and dig through your bank statement to track each and every one of your credit and debit card purchases. This will help you to determine how much you are spending on movies, restaurants, shopping, and other miscellaneous things.
Make it a habit to note down every transaction. The total will give you a clear idea of how much you can save and from where. Yes, you need a bit of consistency and motivation to go through the process every month, but think about all the cash you could save by eliminating unnecessary spending.
Step 4: Make adjustments
Now that you have tracked your spending pattern, it is time to make some positive changes. You will definitely see where you are spending excess money, and you could cut down and stash that money in a secondary savings account. So, once you have a considerable amount saved in the account, you could use it for a more rewarding experience.
A zero balance savings account will be an ideal choice for a secondary savings account. Such an account is free of any maintenance charges and you earn interest on every rupee you save in the account. Additional benefits of the Kotak811 zero balance savings account include a complimentary debit card, up to 7%* p.a. interest with ActivMoney, a credit card without any documentation, and a variety of investment and digital transaction options.
The takeaway
Once your budget is in place, you will have a clear idea of where to put your money and how much you have at the end of the month for entertainment. And it is always good to reward yourself for your achievements. You have worked your way through an effective budget. Why not celebrate?
Initially, this entire budgeting story might sound like the most difficult one. Take one step at a time and don’t try to rush with your budget. A good budget will give you a structure and will secure your financial portfolio.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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