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how would manage your budget toward goals

how would manage your budget toward goals

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Answer #1

So basically budget management is very simple if you follow the rules outlined by Mr. Warren Buffett.

People generally do " Income - Expense = Savings"
However this is a major mistake. Instead you should do " Income - Savings = Expense". This way you are saving before spending which would solve Step 1 of your budgeting problem i.e. savings.

Now all your goal based planning needs to be done by investing the Savings. This should be done keeping in mind certain goals. This would help you to strengthen your finances as well as keep it more structured.

Once this is done, you can keep a tab on your expenses and understand where you are over spending. You can cut down on unnecessary expenses and include the same in savings. This would help you to build corpus faster and reach your goals faster. This would ideally help you in the long term goal based planning.

SIP - Systematic Investment Plan i.e. Dollar Cost Averaging goes a long way in realizing your goals.

Under the expense head, you need to outline the sub-heads under which you spend. You would then need to check on the same and understand where you need to compensate or reduce. This would help you in planning in a structured manner.

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