Make a budget plan that you can ‘actually’ follow

Dear Sqrrl,

My name is Aashna and I am 27. I live in Gurgaon where I do a daily 9-6 job for a renowned corporate firm. I have a decent salary package but the one problem I have always faced is budgeting. No matter what I try to cut down, or do within budget, I am always overspending. It has gotten really out of hand. Can you suggest some tips and tricks to make a monthly budget plan that I can actually stick to? Thanks :))

First of all, thank you Aashna for asking this question. Let us tell you that, you are not the only one struggling with maintaining a budget. This is the one question that we have got multiple times, since the advent of our firm. Our guess is that you have read almost all articles on the internet about “how to budget?” For the most of us the drill is the same: WE PLAN, WE BUDGET, WE FAIL, WE PLAN AGAIN, WE FAIL AGAIN!

But what’s the solution out of this?
What is the right way to budget so that you can always manage within the budget constraints and not only manage rather enjoy?

After some research and experiment, we have come up with a set of things you could do that will help with better finance management. Some points you could look at when considering making a monthly budget the next time are:

Be optimistic but not overly so

Wondering what that means? It simply means that there is nothing wrong about setting big goals, the only problem is when you set goals that you can’t possibly meet in real time. For example, planning that you will spend only Rs. 500 on eating out every month when you know that you are a big fan of eating out is not really a sustainable scheme.

The main problem with this plan is that the goal you have set is very inspirational (and if you are actually one of those who can meet it in real time, then kudos to you along with a pat on the back!) but for most people it is unrealistic. It’s almost like you’re setting yourself up for failure and then when you fail you end up feeling bad about yourself. The only way out of this regular cycle is to identify the root cause behind the issue and work on it.

In this case, it would be to set a more practical goal for yourself. That way when you realize it, you end up feeling more powerful and optimistic about your potential. Next time you do it, you will feel the sheer joy of motivation!

The timeless debate of Needs vs. Wants

This one is a difficult nut to crack but if you get this right, then half of your monthly budget problems would be solved but easier said than done, right?

Let us make it clear to you, we won’t suggest you to just stop spending on items you really like or live for just because they are a bit expensive or can be labelled as luxury. Rather what we would want you to do is make a personal call. A personal choice between what constitutes “needs” for you and what constitutes “wants”. A need for you could be a “want” for someone else and let’s not be biased against someone (including you), if you like pizza so much that you need to have it twice a week. 

The idea at hand is that we don’t stop you from indulging but what we would want you to do is, identify your personal criteria of distinguishing between needs and wants. How does this plan help you save any money then? Here is the catch! This is the place where the smartness of a consumer comes in. Once you establish your personal indulgences, you can cut off the conventional extras from the list of needs. This way you will have a better idea as to how to move forward with your budgeting plans in future.

Reflect on your own long-term and short-term plans and desires 

There is no tailor-made scheme or concept that can work for everyone when it comes to budgeting. The fact of the matter is that every person has a different end goal in mind. Your life should work according to your own set of rules and standards and not what a piece of paper suggests to you.

But other than that what and how to plan for the future? For starters, save after thinking what short or long term plan are you saving for and how much do you want. You can save for short or long term goals by starting a monthly SIP or by making investments in mutual funds. We understand, it’s not always possible to save when you barely have enough money to scrape through but you have to start somewhere even if you start small. Don’t save just because you have to fulfill a vague moral duty or just to get the load off your back, save because you know that today’s responsible actions will lead to tomorrow’s happiness. Last but not the least:

Save before you Spend!

This “saving” we talked about in the point above has to happen before you start spending. If you defer saving for the month-end then you will never be able to save any money. Literally, either start investing or some money aside (10-20% depending on your personal circumstance) and forget all about it. A wise person knows that life is uncertain and plans for it in advance. Building a saving fund is a good idea so as to ensure you have enough money for rainy days. 

A portion of the money you save should also go into building an emergency fund, especially when you are working a job which is not highly stable or secure. If you lose your job that will leave you with almost no money to cushion on if you have not built yourself an emergency fund. This one is literally a no-brainer, and you have to at any cost make an emergency fund. It’s especially needed if you are an independent person who has no partner or family to fall back on for financial help. Your basic survival will be at stake if you lose your job. We mean, not having rent to pay for your flat for the next month is not exactly desirable, right?

So, keep these three points in mind, when you plan the monthly budget the next time. As Beckett says, “Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.” No, we don’t wish that you fail but even if you do, even if you fail in sticking to the budget even this time around, just make sure that you have failed better as compared to before. Keep trying and if you are really honest in your efforts, then one day you will eventually succeed :))