Many of us might have thought about tracking expenses, making a budget, etc., to get our lives back on track. But if you are reading this, the idea probably didn’t work. No worries. Starting a budget isn’t hard. It just requires the individual to be consistent and focused. Budgeting is a common step followed by everyone, from households to even the finance minister preparing the Union Budget.
Let us begin assisting you on “How to Start a Budget from Scratch?”
1. List down all the sources of income:
Before starting with budget preparation, list down all the income sources. It may be regular salaries for employees, pocket money for students, stipend for interns, or profit for businesspeople. Along with these regular sources, list down estimated profit from stock markets, dividends received, etc, if any.
Jotting down everything will give you a number according to which the budget has to be planned.
2. List down all the expenses:
The next step is to list down all the expenses. The expenses may include
- Daily expenditures like bus fare, fuel cost, food, and beverages etc.
- Weekly expenditures like stationery, groceries, etc.
- Monthly expenditure like rent, broadband bills, shopping, etc.
- Other expenses like travelling, vacation, one-time purchases, etc.
These are some expenses that individuals may have. Apart from these, if there are any other expenses, list them down as well.
3. Identify and eradicate unnecessary spending:
Listing down the expenses will give clarity on where the major chunk of money is being spent. Also, it will give an opportunity to analyse and find out if there are any unnecessary expenditures happening that can be removed or controlled.
Going through all the expenses gives a sense of self-awareness about spending habits.
4. Bifurcate it into 50:30:20:
50:30:20 is the budgeting rule that says to spend 50% of the total income on needs, 30% on wants, and save the rest 20%. “Needs” may include rent, water bill, electricity bill, fuel expenses, etc. “Wants” may include shopping for that one dress you have been wanting, bike or car accessories, sneakers for sneakerheads, etc. The rest 20% should be saved or invested. This is very important as it will contribute to your emergency funds, wealth creation, etc.
However, this ratio can be altered to suit individual needs and goals. Someone wanting to save more may change the ratio accordingly.
5. Use Online Trackers:
Online trackers can help implement the budget plan efficiently. There are many applications available that help in tracking expenses, jotting down income, and seeing how much an individual can save.
Many trackers also give the facility to view their monthly spending with visual representation, like graphs, etc., notifying them on spending a certain limit, and many more to ease the process of budgeting.
6. Analyze and Improve:
Making a budget gives a good basis of comparison between the goal set and the actual expenditure. Trackers give full disclosure of the amount spent on different activities, which will help in analysing and improving the spending habits.
It will give insights into areas where expenditure can be limited, contributing more to the savings. For example, someone buying some or the other grocery item daily may plan and get it on a weekly basis, contributing to more savings and less hassle.
Bottomline
The conclusion can be drawn that budgeting is no rocket science, just following a few simple steps, and you are good to go. It does not require any fancy measures. Being consistent does half the job. This basic guide will help you start preparing a budget, and then you are free to make changes accordingly.
Reaching heights requires beginning from scratch.
Written by – Tanya Kumari