Budgeting enables you to sleep better!

I started working in 2015 and am unable to save money due to profligate spending habits and addiction to online shopping. Any tips for how to begin saving and cut expenditure?

V. Jaya, Bangalore

You are not alone. The majority of millennials and Gen Z sail in the same boat. Non-planning and lack of organization are the root causes that harm your finances. If you lose track of your finances, you will soon lose sleep over money.

Do you track where your money is going and how much is your total expenses? Do you know how much you owe others and who owes you money? What is your debt? How much is the total monthly income? If you know the answers to the above, you will be able to control and curtail your expenses and increase your savings. The only tool to get the answers is 'Budget.' You can regain control over your finances once you start budgeting. A budget will enable you the freedom to spend within limits. A Budget is a vital part of your financial well-being.

What is budgeting?

Budgeting is nothing but the process of making a plan to handle your money wisely. Budgeting is only estimating income and cash outgo and balancing your spending with your monthly income. Budgeting is a prominent aspect of personal finance and goal setting. Put simply, having a financial goal or goal setting is a fundamental component of financial management. Setting a goal is as easy as ABC. The story doesn't end with setting goals. Budgeting helps you track how far you have achieved your goals. Also, it will make you monitor and stick to your financial goals.

How helpful is the budget?

A monthly household budget is an essential tool because it provides control over finances. A budget also brings accountability, transparency, better insights, and strategies. Budgeting doesn't mean not spending money. Budgeting means spending and savings in a planned way. You will have control over money when you know where your money is going. Additionally, budgeting helps you know how to allocate your money. You will understand where your spending habits are weakest and warn you about your financial limitations. In short, budgeting saves you from overspending and minimizing your debt. Overall, budgeting keeps you organized.

Who should adopt budgeting?

Even a student should make a budget in order to plan where the monthly pocket money is likely to be spent. Every earning member ought to have a budget in place. Historically, the women of the house maintained an expense sheet. So, homemakers and working women are not strangers to income and expense recording. Every household or individual must have a budget, regardless of age, sex, employment status, or any other. Budgeting is nothing but the art of forecasting and allocating money towards various expenses such as household expenses, lifestyle expenses, medical expenses, repayment of loans, utility expenses, and savings.

When to begin budgeting?

There is no specific time to draw a budget and every day is a new beginning. However, beginning from the first day of a month will be ideal. If you are struggling to make and maintain a budget on a piece of paper, use an excel spreadsheet each month to tackle everything from income to the little bills you might forget about when planning your finances for the month. You can also manage transactions that owe you money or receipts and money you owe others.

What do you achieve out of the budget?

One can track the expenses, observe one's spending habits, control the expenses, curtail unnecessary spending and save more money. Comprehensively, budgeting can help you make better financial decisions, preparing you for emergencies. Consequently, you will not get into the debt trap or need a credit card balance transfer. With a proper budget in place, you will stay focused on your short-term and long-term financial goals. Your budget allows you to explore various investing opportunities. In a nutshell, budgeting is the first and foremost financial habit you can adopt. However, incongruence may still occur with a budget in place when spending behaviour contradicts a well-defined financial plan or a budget.