Beat the financial woes with budgeting

Every spending or saving decision you take, whether big or small, reflects on your financial health

By
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

The past one-and-a-half years has brought uncertainty in everyone's life, especially in terms of finances. Many have lost their job, while others are working on lower salaries than before. More than anything else, this period has highlighted the importance of cutting back on excessive spending and saving money for emergencies as well as the future. The best way to start saving is invariably creating a budget that accounts for all your personal finances. Every spending or saving decision you take, whether big or small, reflects on your financial health. Identifying your spending habits, saving where you can, and spending on what you need will ultimately become your best bet to ensure sound financial health. Here’s looking at some ways to make sure you have a balanced budget.

Unsplash

Keep an eye on your cash flow and spending

Vadim Verdyan, leading global financial advisor said, You'll likely have less 'play' money than you did before the pandemic. Having been hit hard by the pandemic’s impact, people are either in negative cash flows or in positive cash flows. The ones with negative cash flows need to stock themselves financially. These individuals need to minimize or possibly eliminate discretionary spending. On the other hand, people with positive cash flow should take advantage of the situation and save some more money rather than discretionary spending.

Keep your saving account to hold up for at least six months of emergency

The pandemic made everyone realize how essential it is to have savings. The fact that you are earning enough for your day-to-day life does not take away from the necessity of creating a pool of savings for exigencies. Instead of spending frivolously on avoidable things, use extra money to create an emergency savings account, retirement account and to clear existing debts.  Ideally, you should have six months worth of funds available in your emergency savings account at all times.

Know about your short- and long-term savings plan

While going with your short- and long-term savings plan, make sure to do a financial check-up and carefully evaluate the short-term as well as the long-term goals. Often the short-term goals include saving for a summer vacation, savings to buy an important electronic device for work or home, or it can be some personal mends that have to get done. Long-term savings include, down payment of your house, savings for an SUV, or nothing but saving for retirement. However, before making any financial decisions, make sure you are taking a stock of your existing finances like money tied up in investments, property, etc. Only by reviewing your financial position will you be able to take informed spending decisions.

Be smarter about loans

You may have taken a student loan for your studies, and during the first few years of your job, you will be in student loan debt. Likewise, you may be in credit card debt, car loan, electronic device loan, etc. These debts will always keep you on your toes, and a major chunk of your earnings will go towards EMIs. So, your budget must be created in a way that can account for these monthly instalments.  Look for platforms that are designed to simplify the lives of individuals looking to secure loans with affordable interest rates and flexible payment tenures. This way, your debt will not be hanging over you or stressing you out. It will easily fit into your budget.

Adopt new spending rules

Transform your spending behaviour. Minimize impulse purchases and ask yourself if you really need the item you’re eying. You should also ask yourself, can you wait for off-season or a sale to buy it? The overall financial situation is not in good shape, and budgeting is the first tool in your armour to ensure that you’re ready to battle financial woes if they occur.

The world has been in a completely upside-down scenario, especially financially, because of the pandemic. So, apply these effective recommended steps to boost yourself financially.