It is undoubtedly that modern consumer culture is full of traps that lure us buying so many things we don’t really need. But that’s we are only half of the problem. At some point, we stopped being Indian citizen and start being first and foremost, Indian consumers. If we want to take control of our finances, we also have to take responsibility for the many unnecessary purchases we have made and understand that nothing will change unless we change our behaviour. While everyone knows the benefit of daily exercise and walking, how many of us manage to follow it regularly? Similarly while taking control of your personal finances why you don’t track your regular spending?  It’s so called as budgeting. I know what you are thinking. Even if you don’t mind budgeting,  your spouse may hate it, or you may never have made a habit out  of it as a couple and so you find yourself doing it less and less and eventually not at all. Budgeting is the most important tool to see the gap between what we say is important to us and how we spend our money. It forces us to face the reality of how we spend. Budgeting is not just about numbers, it’s about awareness. I think anyone who takes the time to think about it would agree that spending money in a way that’s aligned with what we value will bring us more happiness. So why are not we doing it?

budgeting

I have explored those bottlenecks why most people view budgeting as a punishment.

  • You don’t think as it’s fun

Budgeting requires being disciplined by setting and tracking spending goals. But being disciplined is hard, and people tend to avoid hard things.

  • You think you know where your money is going

No, you don’t know where your money is going unless you track your spending. Nearly everyone I have seen go through the process of tracking for even just a month has said some version of the common sentence: “I had no idea I was spending that much on X.” Trust me, tracking will teach you something you did not know about yourself.

  • You’re not sure you want to know

You may be putting of budgeting because you know you have made some questionable decisions that you had rather not examine too closely. Why did we buy that LED instead of contributing to our children’s college fund? Why did we take the international trip to Europe when we knew it would take months to pay off the credit card bills? When we set a budget we have to ask questions like that. Then we have to decide, do we want to change our behaviour?

Where should you begin?

You can start by making a list of your fixed monthly expenses. Sometimes, these are often referred to as committed expenses where you have to  pay each month such as Rent, Housing EMI, Car EMI, utilities, insurance, cable, cell phones, etc. While getting automates these payments, I also recommend automating any long-term savings goals you have decided upon. Don’t just say you want to save Rs 5,000 a month; do something about it.  As with your fixed expenses, you can automatically transfer a set amount to savings or investment accounts every month. Don’t force yourself to make the decision to save every single month. If you do, I guarantee you’ll frequently find an excuse not to make the transfer.

Now you are ready to start reviewing your discretionary spending. I strongly encourage my clients to do so once a week, at least in the beginning. Again we are aiming for awareness, not judgment. You may be prone to think that you only spend so much on coffee or eating out, but what do the receipts show? When budgeting, you need to make sure the perceived numbers match the real ones.

Throughout this process, you may become aware that you are paying too much for utilities or other services. For instance, before you flip the switch on automating your loans, make sure you understand the payment breaking down. If you are still paying hefty premiums for traditional insurance you no longer need, contact your insurance company and take the necessary steps to the drop the insurance. If you determine that dropping  some monthly expenses such as subscription to a music site, premium cable, unlimited internet services, will help you reach your goals faster, don’t wait to make the change. Automation is about simplifying your monthly finances, not checking out of the process completely.

Tracking for awareness

Once you have tracked for a month or two, you will have some solid information about whether or not you need to start rethinking any of your behaviours. This exercise can end up with a couple of different outcomes. Many of my clients realized that they have been consistently spending too much on things that are not really important. They have used this information to rethink their values and goals, making sure to factor in time and money for their new discoveries. They recognized the fact that things like organic food, travel, or continuing education are a lot more important to them than they thought.

Testimonials of our Some Clients about Budgeting

While speaking about the budgeting, one of my clients Mr Vishal Kakar and his wife who had advised to prepare their monthly budget by making a note of their various sources of income and expenses under different heads. They say,

“Budgeting helps us to know what percentage part of our income going out for particular head of expenses. In this way, we have sense of control over the money coming in and unnecessarily money goes out”

In another corner, Mr Amit Goyal and his wife Mrs. Neetu Goyal found that some extra expenses, like weekly dining out or monthly a short trip are eating the major portion of their income. Couple says,

“Having a budget makes it harder for us because we have no an idea of our expenses at the beginning of a month. Now we keep our expenses in control so that we can save for our future and that of our 3-year old son, Bhav.”

But even if after cutting down on life style expenses they still could not have enough surpluses to meet their goals. It is, then advised them to relocate their rental living home to another place where they could be reduced their rental expenses up to 50% of earlier. Couple is now able to save enough for certain goals like son’s education and retirement. This is hard, but this approach can help you cut out the non-essential and get crystal clear about how you really want to spend your money and time. It may seem extreme, but it can shock you out of a rut you may have been in without even knowing it.

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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an M.com from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at info@prudentfp.in
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