Planning is important. Achieving your goals is possible by making effective budget planning and meeting saving targets. According to NerdWallet survey of 2015, on average 9 percent of total household income is spent on interest payment for a year and every one consumer out of four is worried because of his expenditure bills.
The good news is that there are some proven ways through which finances can be put in order, as effective budget planning could help in achieving your financial targets
Maintaining no track of expenditure is the point where a gap between your finances and personal goals increases. Formation of budget is very important to categorize the expenses in order.
This will involve identifying the spending habits and type of expenses incurred. When different types of expenses are identified and recorded under respective category, it helps in identifying expenses that are consuming most part of your disposable income.
For example, if social expenses are consuming large portion of spendable income, then a limit cap could help in lowering down this expense. Social expenses could simply be lowered by altering the way in which social commitments are met.
For example, instead of meeting your friends over bar with expensive drinks, you can go to bar which is offering quality drinks within affordable range. This way by changing the spending habits and by going for the options requiring low budget, expenses could be kept in track. Likewise, income targets could also be set for achieving the budgeted expenditure.
It is better to make a saving plan earlier than to regret for it later. Making a plan for saving is one step. More important factor is to make a resolution of how to achieve this target. Making a plan involves identifying personal goals and amount required for achieving it.
Next step is setting a monthly or yearly saving goal required for accumulating money for your personal goal. This may involve opening a savings account and depositing part of your monthly saving in it. Monthly saving targets are not easy to achieve and may require change in lifestyle or changing spending habits.
Nature of monthly bills incurred shall be placed in focus and bills which could be reduced or eliminated altogether shall be identified. For example, subscription of service which is rarely used can be cancelled altogether for eliminating its cost. Likewise, grocery budget could be reduced by effective meal planning and reducing amount of food wasted.
Automating the savings in your savings account is useful strategy for avoiding any kind of delay or over spending of expenditures.
Many employers transfer salary through online banking transactions and money is deposited directly into employee’s account. A part of that payment could be set aside or transferred to savings account for automating the savings process.
Monthly transfer to savings account in this way will keep the money kept in current account to be available for budgeted expenditures only. Likewise, utility bills could be paid through online banking to avoid any late payment surcharge.
As soon as some amount is accumulated in your savings account, then debt repayment process shall be initiated. This is the fourth step after creating budget, saving and automating saving.
First step involved identifying spending habits and categorizing your expenditure. Second step involved saving money by lowering the categorized expenditure as much as possible. When savings targets start to achieve then it is important to pay off any loan amount that is outstanding and bearing interest.
High interest bearing debts should be paid off first. But it is also important not to spend all your savings in repaying debt. Emergency fund shall always be kept aside for meeting unexpected expenses.
Make Saving Targets For Achieving Long Term Goals
Saving targets shall involve saving for long term goals. Long term goals can be saving for a child education, saving for buying a dream car or house or saving for purpose of retirement.
It is better to achieve these long term targets by investing amount in long term securities, such as, deposit certificates or financial saving plans in which amount of return is accumulated in principal as a compound interest.