Budgeting- monthly budget planning- 5 Functional Steps

Budgeting itself a vast topic to discuss. Here we discuss Monthly Budget planning or Household budgeting with 5 Functional Steps.

What is Budgeting?

Budgeting is the art of savings and smart spending. Track your money and spend smartly.

Nowadays there are different app and software used for budgeting but I am still now with the old school of thoughts and really prefers a pen and a notebook.

5 Functional Steps And Tricks Of Budgeting

Step#1: Calculation

Calculate and sum up your all source of income. like property rents, Fixed Deposits, Dividends, Salary or any type of business income, etc. This product will be your total net income.

Step#2: Savings

Net income -Savings%=Gross Income

For savings firstly set your goals. Without any planned goal it will be blank and seems useless. we will not work actively without any pre planning so set a goal will help in more functional savings.

Wants to buy your own apartment or house.
Wants to buy a car.
Wants to go on a trip.
Savings for investment purposes.
Savings for health emergencies.
for kids' future etc.

In short, ascertain a random fixed % of your net income for savings purpose and forget it for a long period of time will help you in your rainy days and helps to feel debt-free.

Step#3: Fixed and Variables

Write down your fixed and variables expenses according to your lifestyle and priorities.

Fixed expenses

Groceries
Utility bills
Rent
Education fee
Transport (petrol, gas, etc)
Dairy products or Milk
kids expenses (diapers, accessories, etc)
Insurance policies.
vegies and fruits

Variable Expenses

These can be prioritized according to your needs and income. followings are some head of accounts of variable expenses.

Learning skills:

kids activities
online courses
driving course
short courses
new books

Entertainment:

outing
dine out
other games activities etc

Shopping:

Seasonal shopping
Toys
Misc. accessories

Gifts:

birthdays parties
occasions

Maintenance & Decor:

maintenance of a car or any vehicle

decor items

home appliances and gadgets etc

Step#4: Distribute a fixed % of your income to all categories of both fixed and variable expenses. This step shows our limits to spends and helps us control and avoid our spending on useless things.

Step#5: Give a home to all your distributed income to the categorized head of accounts.
I am personally comfortable with the envelope system.

Spend smartly debt-free for whole the month.

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