5 Steps for Financial Budget Planning

Tracking the monthly expenditure:

The first step includes the calculation of the fixed monthly expenses. This list should cover the amount associated with all the needs which are unavoidable and are an inseparable part of the lifestyle. From groceries to milk, from bills to monthly subscriptions, from the payment of newspaper vendor to that of the maid- this list should include all.

Emergency fund for next 10 months:

Next step is to ensure saving up for emergency times. Earlier, the time frame recommended used to be for 6 months; however, the global pandemic has taught us great lessons and has forced us to bring certain changes in our actions as well as thoughts. With job insecurities and sinking economy, it is better to have the time frame extended to 10 months. Yes, this is the new normal. If the recommended amount is already available handy, one can save for unforeseen medical emergencies and natural calamities.

Planning the tax saving schemes:

The next step is to plan the tax-saving strategies. As citizens, we all need to pay taxes; however, the government provides us with certain options that can help in the reduction of taxable amounts. These options can include, for instance tax saving mutual funds and loans. It is extremely important that one ensures to take advantage of such schemes and reduce the taxable amount as much as possible.

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Categorizing the goals:

At the end of the day, savings are done to fulfill our needs and wants. If not today, the goals will develop in the near future. However, in both the scenarios, it is advised to segregate some amount for two types of goals: long term and short term.

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Investment:

Here is the final step-last but not the least. After setting aside the amount for expenditure, emergency fund, tax saving schemes, short term goals and long term goals, the remaining amount is what results in building and multiplying the money. Since the money required for the needs and to fulfill the wants is already set aside, now is the time for investment.

Photo by Mathieu Stern on Unsplash

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Kre8ive Quill

Kre8ive Quill

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I am a blogger and freelance content writer. Kre8ive Quill is my psuedonym.