The most difficult part of money management is perhaps designing a workable budget plan. Most often it is seen that you end up spending a lot more than what you actually earn. The result is that you have to take the help of loans in order to meet your monthly expenses. These loans come along with a high interest rate and you are required to pay them within a stipulated time. Then again if you fail to repay them within the stated period you get yourself trapped within a vicious cycle of debts. The never ending fight for financial freedom thus begins.
However the condition can definitely improve for those who are willing to take a chance and fight back. All you need to do is to become a little prudent with your finances and follow some basic steps. Discussed below are some of such steps:
1. Determine your income sources: It is important to note down how much you actually have for spending. You need to take into account your salary, rent from house if any or any other income source that you have. It gives you an exact idea of your income which can then be related with your basic expenses to design the basic layout of the budget.
2. Cancel out the deductions on funds, taxes etc: You may not get in hand your full income package. There are taxes, provident funds, insurance schemes and other investments where the money gets deducted. It is therefore necessary to make a note of all of them and deduct them from the total income to calculate your actual income.
3. List down all your basic expenses: Every month there are some expenses that you cannot shake off. Some of them are electricity bill, grocery bills, and phone bills, college fees of kids, loans, and mortgages, insurance, so on. Make a list of all of them and calculate the total expense that you need to make.
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4. Rolling expenses are to be counted: If there are any rolling expenses such as loans and mortgages which you need to pay make a separate list of them. Note down the due dates and interest rates along with the amounts on each. Make special note of the ones that charge late fines or high interest. Try to repay those loans first.
5. Reduce the expenses on luxuries: You may be fond of parties, shopping, having luxurious meals in restaurants etc. but these indulgences can worsen your financial state. Instead of wasting the money on such luxuries you can save them to pay off your debts one by one. The parties can wait till you have a balanced financial state but if you increase your debts further it would be difficult to repay them later.
6. Save the minimum you can: There is never any alternative for savings. It can serve as a boon in the most difficult situation. No matter how little you can save it will be useful in some way or the other. Maybe to gift your kid with a toy or to pay for a birthday gift, you may never know when your savings come handy. They may also serve as emergency funds when you in are need of them.
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If you want to attain financial freedom it would not be difficult if have control over your expenses. Budgeting can be thus one way out to get out of your debts. But you need to figure out other ways too. It is also necessary that you learn to chalk out a budget right now before it is too late.