Budget planning tips to follow for better financial health

Making a budget is essential for maintaining good financial standing. It assists you with organising all of your costs, leaving room for unforeseen requirements as well as treating yourself. 

Does it seem too wonderful to be true? 

Even if you are a newbie, making a budget for yourself is not as difficult or frightening as it may sound.

Learning how to make a budget actually helps you in the short term and in the long run. In the short term, it supports you in being aware of your needs and knowing if you can afford something or not. In the long term, it helps you to achieve your goals, whether it is going on an international vacation or saving up for your wedding.

Read to know more about budget planning.

Why work on a personal budget: A guide 

A personal budget applies to you as an individual, while a family budget applies to your entire family. Budget preparation is a crucial part of financial planning for the following reasons:

• Supports you in saving and investing smartly
• Helps you identify and achieve your future goals
• Aids you in dealing with emergencies
• Stops you from spending too much
• Helps you understand your financial habits and modify them when needed

All in all, working on a budget and following it is key to achieving financial well-being, now and for your retirement. 

Steps of budgeting

While there are many ways to go about designing a budget, follow these steps of budgeting to get started:

Step 1: Enter your earnings: Apart from the income you receive from your salary, you may also get rental income, income from investments, earn from freelancing gigs, or receive money as a gift from relatives. Add them all up.

Step 2: Divide your expenses into 3 categories: Under needs, enter your rent, electricity, water and internet bills, phone bills, grocery and basic grooming expenses. Add in any loan EMIs, such as bike loans and more. Under wants, add in expenses towards things like OTT subscriptions, entertainment and dining costs, shopping for extras and more. Under savings and investments, chalk out what you want to build as an emergency fund and what you want to invest in FDs, mutual funds and more. Factor in tax-saving investments too! 

To compute your savings in a practical way, take your goals into consideration. From doing a course in 12 months to upskilling and planning a holiday in the summer to buying a home in 5 years, you can enter all these details to arrive at the figure you want to achieve. 

Step 3: Check the total of your expenses and subtract from your total income. If you can get your income after tax, you will get a more realistic figure. 

Step 4: Given this calculation, see what you are left over with. If it is not enough to meet all your goals, you can now trim your expenses, especially under the category of wants. Make all the adjustments you need to, and you will now have a budget you can follow! 

As you can see, budget planning is quite easy to do once you have the basics in place. Try it for yourself and be sure to adhere to it. While you can indulge yourself to feel motivated, overspending can harm your financial future. 

With the right budget preparation, you can also see how you are falling short and bridge the gaps when needed. For all these occasions, rely on Fibe. You can get up to ₹5 lakhs as an Instant Personal Loan with ease. Simply download our instant loan app or log in to our website. 

FAQs on budget planning

How do I create a monthly budget in Excel?

Budget preparation is easy to do in Excel by using a template. Based on the software version you have, you can choose templates like ‘Manage My Money’, ‘Personal Budget’ or ‘Family Budget’. Then all you need to do is fill in the relevant sections. 

How to make a budget for beginners?

The steps of budgeting for beginners are as follows:

• Jot down your expenses every month by tracking your spending over 6 months
• Make a list of goals you want to achieve, their cost and timeline
• Add your income from all sources
• Add what you plan to save on a monthly basis 
• Now trim all expenses 
• Create a new monthly budget to follow 

How do I create a monthly budget chart?

You can easily create a pie chart or bar graph of your budget with expenses, income, savings and more using templates in Excel. 

What is the 50 30 20 budget rule?

The 50/30/20 rule of budget preparation suggests that you:

• Spend half of your earnings on things you need, such as fixed expenses for rent 
• Spend 30% on discretionary expenses or things you want 
• Save 20% of your income 

What is the rule of 10 5 3?

The 10, 5, 3 rule applies to investing to give you an idea of what you can expect to earn. It suggests that you can expect:

• 10% earnings on equity investment made for a lengthy tenure 
• 5% earnings on investments in debt instruments 
• 3% earnings on savings accounts 

Make sure you understand that these are averages, simply meant to help you plan your investments.

How do I divide my salary?

You can divide your salary as per the 50/30/20 rule or based on the individual budget planning you have done for yourself. 

How should I spend my salary?

Spend your salary on urgent and fixed expenses first while allocating a percentage for savings and investments. You can then use the rest to finance your goals and reward yourself. Budget planning can help you split your salary into these categories and help you spend smartly.