Many students feel that the root cause of their financial worries is that they’re not making any money in their college life. However, very often, they face financial problems because of poor money management, rather than lack of money in the first place. Living within one’s means is an art you don’t want to spend too much on frivolous items, but you don’t want to compromise on occasional fun activities like dining out, watching movies or traveling with your friends. Budgeting helps you strike a fine balance between your wants and needs.
It is also the art of spending your pocket money in a way that allows you to live within your means and achieve a state of financial wellness. Here are some simple, time-honoured budgeting strategies that will ensure that regardless of how much you get, your bank balance comfortably stretches to the end of the month.
CAP YOUR MONTHLY OUTGO
Before you begin allocating money to various expense heads, draw up an estimate of your monthly outflows, based on your track record of the last three-six months.This will help you understand how much you typically spend in a month, and whether that figure makes sense given your present income. If your monthly outflow is 90-100% of your monthly income, you may want to bring it down to a level that gives you room for savings. While there is no universal rule, saving 20-25% of your monthly income is a very good target to have; this means that your maximum monthly outgo would be restricted to the remaining 75-80%.
BUILD IN SEASONAL ONE-TIME EXPENSES
There are certain costs that are seasonal for example, college fees at the beginning of an academic year, winter clothing, or festival expenses. When creating your budget at the beginning of the month, factor in these upcoming expenses and calibrate your budget accordingly. Barring hard-to-anticipate scenarios like sudden medical costs, such expenses are usually predictable. If you can, temporarily postpone other discretionary expenses to take care of the above costs.
BE A SNEAKY SAVER
Expenses have a way of sneaking up on you; get even by being a sneaky saver. The minute you get an unexpected money from somewhere, for example from winning a competition or so, transfer the windfall amount into your savings account. Alternately, pay off an installment or a bill with that money. Leaving extra money lying around just creates a `splurge reflex’, which you want to avoid at all costs!
KEEP CREDIT CARD SPENDING UNDER CONTROL
You probably knew this already, but we will say it again credit card debt is really expensive and can hurt you badly, if it spirals out of control. Keep tabs on your credit card debt, and try to bring it down to zero as soon as possible. Or better, don’t use a credit card.
GET THE ADVANTAGE OF CASHBACK OR LOYALTY POINTS WHEN SHOPPING ONLINE
There might be a zillion e-shopping sites out there selling everything from movie and travel tickets to clothing and gadgets, but we only really use a handful of them. List your top four-five e-commerce sites and subscribe to their respective cash-back or loyalty programs. In most cases, all you’ll have to do is download an app or deposit some cash into an e-wallet. This can give you some pretty nifty savings over time provided you shop sensibly.
LIMIT THE NUMBER OF TRIPS TO THE ATM
Having more cash in your wallet makes you want to spend more. No wonder there are ATMs at every corner of the city. Limiting the number of ATM withdrawals forces you to be more disciplined with your money; particularly, with the smaller expenses that add up over time. You also save money on withdrawal charges beyond the free limit levied by banks.
INVOLVE THE ENTIRE FAMILY
Household budgeting is not one person’s job. Each and every member of the family should be entrusted with holding up their end of the deal. For example, the next time you fly somewhere as a family, take packed meals to the airport with you instead of spending three times the MRP on snacks. And, every time the family hits the spending target for the month, take a small treat to motivate yourselves further.