Last week we discussed on why and how spending money gives us happiness. However, the fact is that these spending habits can derail our finances and may even make us compromise on our future needs. You must be wondering “what’s the best way to control this spending urge to plan the finances well?” The answer is
“Have a Budget”
But the moment we hear the word “Budget” it seems like someone is asking us to go on a crash diet. And crash diets brings discomfort to our lives and it eventually becomes impossible. But what if you don’t have to go on a crash diet and yet you can manage your outflows well. Is it really possible??? Yes it is!!! Let’s see how you can do this.
1. It’s not salary, it’s your spending habits that make you rich
A client once quoted “When my salary was Rs.50k, saving money was difficult and now when it’s Rs.1 Lac, then also savings are difficult.” He raised a very valid concern which is common to most of us. And the biggest reason for this concern is the way we spend. Mostly a hike in income is treated as a new opportunity to spend and with time we become victims of lifestyle inflation. If you don’t pay heed to your spending habits, even hikes in income cannot make you rich.
2. Keep an eye on what’s going out
Recently, Budget 2015 was rolled out which threw light on expenditures government would make in next one year. But have you ever tracked down where your income is being spent during the month? Not really!!! Budget is not a plan to save, it’s a plan to spend wisely. Knowing the spending avenues beforehand makes you a cautious and a wise buyer.
3. Do it daily and not once a month
Tracking your expenses is not a one-time ritual which has to be performed at the month end. It’s a daily exercise which would keep reminding you how and where you are spending it. But if you find it difficult to do, the best way is to download an expense tracking app on your smart phone and enter the details whenever you spend money. If you find it difficult at inception, follow Rule 21 – Push yourself to do it for 21 days. And believe me if you are able to do it for 21 days without a break, it would become a habit 🙂 🙂
4. Identify the things you can avoid
When you’re on mission to track your expenses keep a track of small expenses you do such as cab rides or brunches or coffee outings or even a casual outing with friends. These small expenses which often go unnoticed consumes a major part of your income. Once you track them, just evaluate do you actually need them or can you avoid them through some alternative means? Think about it!!! These small savings can do wonders to your budget.
5. The lists are endless. Prioritize them
The needs and wants are endless. And with every passing day they would only rise. Hence, it’s time to prioritize the things you need right away vis-a-vis things that can wait. Have separate buckets for different expenses and use them only when you need them. Set your priorities right and follow your plan.
6. Stop thinking and Start Doing
As they say “Journey of thousand miles begins with a single step”. So now that you have thought enough and the to-do lists are on your mind, it’s time to start. However, it is advisable to take small steps and be regular.