Save for your goals by ensuring a realistic budget
Vanita Vasudev is a 30-year-old-company executive, who wants to save a part of her income and build a corpus for the down payment of a car and house that she is planning to purchase. Her aim is to save 30% of the income and regularise her investments. She set a budget for her monthly expenses, but so far, she has fallen short of her monthly saving target. Though she is serious about saving for her goals, she is becoming disillusioned about managing her expenses with a pre-set budget. She wants advice on what she can do to make it a success?
Vanita's problem is one that many people face when they start living by a budget. Since she is serious about her saving plan, the reason Vanita is not able to do so may be the budget itself. So she needs to ensure that it is a realistic one.
In her effort to save 30% of her income, she may have set very tight spending limits and it may not be possible to live within such constraints. She should go through her expenses for the past few months and identify the categories in which she is over-shooting her budget. These may be the areas for which she has not set aside enough given her expenses and interests.
She should consider increasing her allocation to these if she is very sure she cannot reduce them. Once she is sure that her budget is realistic, Vanita should be flexible with the allocations. If she has overspent in a particular category, she should make up in another or during another month. These steps may lead to lower savings for Vanita, but it is better to have a workable budget than one that has to be discarded because it is too ambitious.
Vanita must see her plan as being successful to have the motivation to keep going. She can do this by breaking long-term goals into short-term targets. For example, instead of looking at the home loan down payment as one large amount, it can be broken down into smaller annual targets. In this way it does not seem too far away or too large an amount to be saved.
The idea of a budget should not be to eliminate all discretionary spending, but to do it with caution. This, along with a sense of accomplishment at meeting her goals, will keep Vanita on the path set by her budget.
Source: Economic Times
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