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| Budgeting & Saving |
Did you know that by cutting down on colas you could do your health as well as wealth a favour?
Skipping a Rs. 10-bottle of a soft drink, say twice a week, could save you Rs. 1,040 a year or
Rs. 10,400 in 10 years! If, instead, you had saved this money in an account paying interest,
you would have been richer by a huge amount at the end of that 10-year period. Now we’re talking BIG MONEY!
However, to achieve this and other goals, you need to PLAN NOW!
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 Planning Financial Goals |
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| 1. Assess Needs |
Evaluate your present financial situation. You need to decide what you WANT and what you NEED. |
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| 2. Set Goals |
The process of setting goals involves turning your NEEDS into goals. Achieving successful financial security starts with organized financial goals that are: |
SMART or
Specific
Measurable
Attainable
Relevant
Time-related |
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| 3. Make a Plan |
It is important to begin to develop a plan for your life. Ask yourself: “Where do I want to be in five, ten and 20 years from now?” Then imagine the actions you need to take to achieve those goals.
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| 4. Take Action |
The first step to accomplishing your goals is to take action. Many times goals are not reached because the first step was never taken. An important part of taking action is affirming your goals. Write them down. Say them aloud. Share them with your trusted friends. Seeing your goals in writing helps them to become a reality.
“Every month, I find I don’t have enough money; if the month were only 20 days long, budgeting would be easy.”
Daily spending and saving decisions are at the centre of financial planning. A budget, or spending plan, is necessary for successful money management. The main purposes of a budget are to help you:
- Live within your income
- Avoid borrowing more than you really need, if at all you have to borrow
- Reach your financial goals
- Prepare for financial emergencies
- Develop wise money-management habits
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| Four Practical Steps to Budgeting |
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Step One: Add Up Your Income |
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Step Two: Estimate Your Expenses |
Your budget starts with creating spending categories. How much you budget for various items will depend on your current needs and future plans. A detailed record of your spending will help you find out how much to budget in those categories.
Here are some broad categories as samples:
- Housing – (EMI or rent)
- Electricity/phone bills
- Food
- Personal expenses
- Household expenses
- Transportation
- Recreation and entertainment
- Eating out
- Gifts for friends and family
- Savings
- Miscellaneous
- Taxes
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Step Three: Calculate the Difference |
Keep records of your actual income and expenses and look out for any “budget variances” – the difference between the amount you budgeted for the month and what you actually spent. |
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Step Four: Track, Trim and Target |
As you track your monthly expenses, you may need to trim them. Reducing an expense is usually easier than cutting it out altogether. Budgeting is an ongoing process. You will need to review, and perhaps, revise your spending plans on a regular basis.
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Start Saving Early |
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Rita and Rahul both save Rs.1,000 per year. The money each saves earns 10% interest per year.
Rita starts at age 22 and stops at 30. Rahul starts eight years later than Rita, at age 30, and stops at age 65.
By the time they both retire at 65, Rita has already made net earnings of Rs. 388,865.35 with the total investment of Rs. 9,000, while Rahul has invested a total of Rs. 36,000 but receives Rs. 329,039.5 only in return.
Because Rahul started to save late, he never caught up. |
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Disclaimer: Amounts and rates of interest are indicative. |
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Information courtesy VISA |
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