We earn a lot and also spend the same. But we do not plan our expenditure. Like we manage our business, household and other activities it is essential for each and every person to manage their monetary terms. We can feel relaxed if our savings, taxes, investments and other expenditure are properly organized and planned.
Guidelines
In order to adopt a proper financial planning, management of personal expenditure is mandatory. The following are the few simple steps that help in managing the expenses.
- Draft a budget and pre-plan your expenditure
- Categorize the expenditure under different heads
- Be practical while planning the expenses
- Book keep the daily expenditures and categorize the same
- At the end of the month, analyze and study the variations between the actual and budgeted expenses
- Avoid mingling one category to the other where the expense is low
Salient features of the expenditure book keeping record
- The idle way to book keep the expenses is to maintain a simple excel tracking sheet
- At the start of the year enter the budgeted expenditure per month for each category such as food and beverages, clothing, stationery, entertainment, education, rent, travel, electricity, telephone, medical, taxes and any other expenses.
- Key in the daily expense under the category as and when they occur.
- At the end of the month we can easily analyze the – category wise monthly expenditure, yearly category wise expenditure till date.
- We can easily track where we have exceeded the budget and take preventive measures
Investments
Now that we have planned and scheduled our expenses it’s high time to think of the investments. The following points has to be followed to be more successful in our investment –
- Starting our investment early
- Constant and regular investment
- Always opt for the investments that provide tax benefits
- Plan your investments in a way where the returns should succeed the inflation rates
The investment areas can be broadly classified into three types based upon their returns. They are:
Basic – Saving Bank accounts, fixed deposits, saving certificates and bonds. The investment return here involves no risk and is constant. It is very low when compared with the other two.
Growth Funds – Investments in Public Sector funds, growth funds and debentures fall under this category. Here the risk is moderate and returns are high compared to the basic investments.
High Risk – Investments made in Mutual funds, commodities market, purchase of land and purchase of speculated stock are the High risk investments. As the name indicates it’s highly risky and gains high returns.
As we track our expenditures, it is essential to track our investments also in a well designed format. At the outset the sheet gives us the ready made information and complete details of our investment. In case of shares, price at the time of purchase, date of purchase, sale date, sale price and balance no. of shares has to be accounted. For the term deposits made in bank, date of deposit, maturity date and value has to be tracked.
