Spendthrift? Here’s help

Budget- the word is everywhere. Discussions, speeches, television, radios, newspapers, magazines, all one hears is the word ‘Budget’.

The market these days is flooded with numerous things to buy from. Buying the latest gadgets, fashionable clothes, and any other thing makes us spend our hard earned money.

But have you ever pondered over the need to prepare your own household budget. Have you ever given a serious thought to either balancing your own budget or financial planning?

The following points will help one realize the importance of budget and will answer the much asked question- Why budget?

1. Budget- the roadmap to success

Maintaining a budget helps one to know the financial position. It is a roadmap to financial success and freedom. Only when one has a budget in hand, one can tell where one is heading financially.

Budget also informs people if they will lead a life of financial freedom or would they be always struggling for money. Leading a life loaded with debt or a debt free life is also elucidated by budget.

Living without a budget is akin to driving without any destination in mind. Burning petrol and ending up no where is the greatest mistake of life, as it will not only waste time and energy, but money too, which is the most essential in today’s world.

Budget provides the necessary 'purpose' and 'direction' to your financial journey.

A budget can act as an early warning signal, which can help you to take corrective action against any financial disaster.

2. Makes the master of money

A budget helps in 100% control and spending of money. On one hand the incomes are usually limited. But when it comes to spending, the options are almost unlimited. This is truer today with the boom in consumerism. Therefore it is important that you manage your resources the right way, which is possible only if you have a budget.

Budget helps in curtailing all the unnecessary expenses and helps spend money on the essentials.

3. Helps deal with debt

A budget has the capability to let you know if you are living a debt free life or are snared in the debt trap. With easy availability of finance - by way of credit card, personal loans, EMI-based purchases etc, one tends to spent extravagantly and ends up in a financial mess.

4. Boost goal setting

Besides basic needs, dream and aspirations are to be fulfilled too. Be it a car, a house, children's education and marriage, foreign trip etc., it all usually ends up on the question of money.

In order to sketch out possibilities, a clear view of financial position is indispensable. More importantly, a budget sets a direction for saving and investment pattern. It helps in proper asset allocation.

Usually, one earns, spends, and whatever is remaining, saves. But this has to be the other way round. First earmark a per cent of your income towards saving and investing. And then work out the expenses around the balance income. This discipline of forced savings is a must to curtail impulse buying.

5. Prepares for out of the blue events

Any unforeseen emergency can be very traumatic. If on top of this, one does not know how to arrange for finance at short notice, the problem is trebled.

By making budged and saving money by spending only on important things, one can deal effectively with any crisis. While making a budget, a small amount of money should be saved regularly and set aside as ‘emergency corpus’. This amount should be kept in a short-term investment option like bank FD or money-market MF so that it is easily accessible.

In case any money from your 'emergency corpus' has been used, refilling it should be the top precedency.

A budget helps to stop worrying and start enjoying money. When the desired goals are being achieved, there is a sense of satisfaction and this savor of financial satisfaction is sweet and long lasting than any impulse purchase.

Preparing the budget is easy but following it month after month and year after year is difficult. Time, patience, commitment and determinism are the four essential ingredients to adhere to the prepared budget, or else it will end up like the umpteen new-year resolutions - only promises and no concrete result.