Kolkata, October 30: We all know a budget is essential to help us achieve our financial goals. But sometimes, even with a budget in place, things might not work out as you expect them to because there may be some basic flaws in your budget.
We look at reasons why your budget may not be getting its job done right and what you should do.
1. You are not tracking every expense: When preparing a budget, which is an essential part of a financial plan, it is important to keep tab on one’s expenses. But sometimes we miss out on small expenses and hence they do not get factored in. Even small expenses like a pair of batteries or a small grocery item add up and should not be ignored. If you are missing out recording small expenses, make it a point to track them as well, as it can help you get a better idea on where your money is going and plan better.
2. You are not being realistic: A budget works only if it is realistic. So if you think you will limit your grocery expenses to Rs 5,000 a month, you may be setting a budget which is too tight. It is essential that you overestimate your expenses, so that you are not taken by surprise. Which is why setting a budget needs proper planning and then adjustment with time.
3. You are not prepared for an emergency: An emergency fund is something you must have. Without an emergency fund, every time some unplanned expenses come up, your budget will go for a toss. If you want your budget to work, it is essential to set aside some money you can use in emergencies.
4. You are not making an effort to reduce expenses: If you want your budget to work, you will have to make conscious efforts to reduce spending. This is because you would want to increase the amount of your investible surplus. You do not need to make drastic cuts but make some changes in your spending patterns. Simple things like carrying lunch to work or cutting down on eating out can help you spend less and save more.
5. You are not trying to stick to your budget: Having a budget is one thing, sticking to it is another. As mentioned before keep track of every expense and find patterns in how they change over time. Only if you keep track will you realise when you are overspending and when you need to cut down on expenses.
6. You are not using tools: A budget needs to be planned for and documented. Earlier people would make entries in a diary. Then came excel sheets. Now there are several budgeting apps that you can use to create a budget and track it.
Make sure you are using a good expense tracker for budgeting and keeping all your information on income and expenditure in one place. Not only can you categorise your spends and track them separately, you can further get information on your spending in different visual forms like pie charts and graphs, giving you a better picture of your finances. If your budget is not working, fix it!