Beginners guide to budgeting and saving

Come January and a long, lovely festival & holiday season comes to a grand close. Now it’s time to gear up for the new year ahead. Business goals, final exams and financial year end targets are going to be the main focus areas.

With all the festivities coming to an end for the year, family expenditure will also fall drastically. Festival discounts, Diwali and year end sale banners have attracted a lot of our attention in the past few months. So household budgets
have been under great strain. It’s time now to take a step back and prune our monthly budgets. It’s time to mind our spends.

For those who tend to spend freely in the first weeks of their salary credit, but their account balance begins to dwindle towards the end of the month – what you need is a budget. You’ve never prepared a budget before? No problem, we’ll
help you make one. Read on …

What goes into a budget?

Let’s take the case of a family’s budget for our discussions. The budget preparation must be preceded by an analysis of the income & expense situation of the previous year/quarter/month. This will give us some data to work upon.

The actual budget preparation involves the contribution from all family members. Each member’s expenditure needs and incomes are analyzed and the forecast of incomes and expenses of the next year are listed down.

Income – How much income do we anticipate for the coming year. List all income sources separately. Be conservative in this.

Debt – What about the debts and liabilities that are pending for clearing that year. Identify old debts that can be closed off. Compare interest rates, and prune your debt. Keep a goal to completely eliminate high cost debt in the next 1-2 years.

Expenses – A detailed expense analysis covering rent, education fees, savings, medical expenses, leisure and travel, insurance, taxes and so on.

Surplus or Deficit – A clear forecast for the present year and projections for the new couple of years. Based on this result, your expenses have to be revisited.

Saving – Set aside emergency funds and long term funds for retirement, home purchase etc. This is critical, don’t treat it as an optional part of the budget.

Risks and challenges – List down the risks and challenges that might affect the budget plan from succeeding. Such as “Is your income unstable”, “Is there a health issue in the family”.

Managing capital and investments

The top 3 considerations of an Indian householder or businessman when it comes to financial investments is maximizing returns, security of investment and minimizing tax liability. This is all achievable through long term financial
planning and saving. Making long tenure FDs, investing in gold, purchasing land are good saving instruments for the long term. These instruments will result in further growth of wealth, guarantee good returns and safety of the investment.

How Chit Funds can help in stabilizing your budget

Chit funds are steadily gaining acceptance, especially among the new age investors and self-run businesses. Since it serves as both a saving and borrowing instrument, it comes with the twin advantages of good returns and
easy liquidity.

When you open a new chit scheme for a lump sum amount with a fixed 2 or 3
year tenure, you start paying monthly installments along with all the peers in the same chit group. At any time during the tenure, you can choose to bid for the lump sum and withdraw the entire money with zero debt liability. The later
you withdraw, the better your returns would be. But in case of emergency, you have an immediate source of funding right at your fingertips.

There is plenty of focus among our youth to increase their income levels through job upgrades, higher education, foreign posting and so on. However, there is very little attention paid to reducing expenses. After all, reducing expenses has the same effect on the budget as increasing incomes! But this simple fact doesn’t seem to register strongly among us. A simple but strict disciplined approach to saving and budgeting is all that is needed. We urge our youth to get into this excellent habit right away. All the very best!

Want to read about a popular Japanese method for preparing a financial budget?
Read our earlier blog on the Kakeibo technique here –

About Us – Shanthala Chits is a Government approved chit fund company witha 25 year successful track record and thousands of satisfied customers. Shanthala Chits is registered under the Chit Fund Act of 1982, Government of
Karnataka. We are one of the most popular chit fund houses based out of Bengaluru, known for our prompt customer support and secure investments. Get in touch with us and start with an investment scheme. We will be glad to help
you out with the right scheme that matches your needs.

Anuradha C

Anuradha is a freelance writer cum corporate trainer in the IT/telecom domain with over 18 years experience. She served in senior technical and management positions in Huawei and TCS for 10+ years. Then gave up the traditional corporate ladder to go solo - in order to escape horrendous city traffic and to be at her own boss!
Anuradha C

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