Budgets and Setting Financial Goals

When you are planning a budget, it is necessary to analyze how you are spending your money, so that you can see where you need to make adjustments in your spending habits. The first thing that you will need to do is take a look at the budget that you have created and figure out where you can cut expenses.

This is especially important if you are spending more than you earn. If you are in this position, you are not alone. As a matter of fact, statistics show that many families who bring in Rs. 5,00,000 or less each year are spending more than they earn. This data seems to back up the assertion that people are in the habit of spending more than they have, thereby creating debt and placing themselves in a precarious situation.

If you are in this situation, then it will definitely benefit you to construct a budget that helps you to minimize your spending immediately.

However, if you are not spending more than you earn, you may still want to evaluate how you are spending. By doing this, you are able to identify areas in which you may be overspending. For example, if your family is dining out every night, you might want to consider cooking at home more often.

When you are planning a budget, you should only include income that you are certain of receiving. This means that you should not include bonuses from your job or tax refunds as income. These things should be considered extras. When you receive this extra cash, it makes sense financially to save or invest this bonus income for the future.

When setting your financial goals using your budget, you should aim to spend only about 90 percent of your income. The remaining 10 percent of your income should be set aside for the financial objectives that you have relegated as the most important.

In order for your budget to be successful and to meet your financial goals, you need to track your expenses on an ongoing basis so that you can eliminate cash leaks. One of the simplest methods to track your expenses is to use some sort of personal financial software. Many computers these days include versions of basic financial software, such as Microsoft Money. By tracking your spending on an ongoing basis, you are able to maintain the spending levels that you have set as goals.

By tracking your expenses, you may also realize that some of the goals that you have set in accordance with your budget are not very realistic. If this is the case you will need to adjust your budget. It does not make sense to set financial goals that unattainable. You also should not set goals that are not very challenging.

Most likely you will make several revisions to your budget before you actually achieve one that is reasonable for your financial situation. Once you become used to using your budget to help you achieve your financial goals, you will find that managing your money is not as difficult as it may have first seemed.