Creating Budgets That Work

It doesn't matter how much we make, if we don't manage our finances well. We have seen people who at one point of time were earning quite handsomely, became broke after a while. This is because they didn't knew how to manage their finances. For carefully managing our finances, a good budget should be there. This is why Budgeting is one of the important fundamentals of personal finances. For salaried people, budgeting becomes so very important because we should not live paycheck to paycheck and having a budget can help us to break that.

What is Budgeting

Budgeting is a way to track your expenses or spending, so that we will be in control of our money and manage the money better. We cannot create a successful budget in say 1 month, it requires tracking and then only we will exactly know all the spendings. For example, it took me more than 1 year to create a budget for myself which actually working for me and I am sticking to it.

What is Required to Create a Successful Budget

To create a successful budget , the only thing which is required is to track all your income and expenses. You can use any tracking apps or you can use the spreadsheets. I use tracking apps daily to note down all my expenses and then monthly once add it to the spreadsheet for tracking purpose. After that monitoring is required to adjust your budgets as per your needs. See everyone is different, and that's why no single type of budget will work for everyone. So what we have to do is to monitor our spending habits and then customize the budget as per our needs.

50/30/20 Budgeting Rule

The 50/30/20 budgeting rule is the simplest and easy to get started. In this technique we will divide our income into 3 parts in percentage wise. The first part should be 50% which is for living expenses like rent, groceries, utilities, transportation, emi's, bills etc. The next part should be 30% which is for entertainment, shopping, dining out. And the last part should be 20% which goes for savings like retirement, emergency fund etc. Now as I said earlier, everyone's situation is different, so that's why you can tweak the percentage as per your needs and goals.

I have create a spreadsheet where you can easily track all your income, expenses according to the category. https://docs.google.com/spreadsheets/d/1hIA8RD1KTdxdefvgnxRg0Xh8-aSlhKZUSwMb4546GD8/copy. This spreadsheet is View Only, you have to make a copy to create your own. Here you can update only those columns which are yellow background as I have added some formulas. In the video, I have shown how to use the spreadsheet.

As you can see how easily you can create a custom budget as per your needs and goals. Do let me know in comments if you have any questions or have you found it interesting.

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