IndiaP2P Blog

Responsible content on personal finance & economics that makes you smarter about money.

What is a budget & how do you stick to one?


Blog Image

"You must gain control of your money, OR, Lack of it will forever control you." -Dave Ramsey


What exactly is a budget, and why do you need one?

A budget is a forecast of revenue and expenses for a specific period of time in the future. Constant money planning and management is must to achieve financial freedom and wealth. Making a budget or a plan is the first step in the journey toward financial prosperity.

For most of us in wealth-building phase, needs outweigh income. A budget enables us to manage unwanted wants by avoiding, delaying or replacing them. It also helps divide available resources towards essential needs and life goals. For fortunate others, budget helps in directing surplus towards priority investments. Whichever life stage you are in, a budget is a necessary tool for managing and monitoring your income, expense, and investments.


Few tips on creating and sticking to your budget.

Begin with  goals
Setting financial goals is the first step in every budget. Retirement, children's education, home ownership, and so on are examples of goals. Writing your financial goals can help you remember why you're creating a budget and will help you stick to it over time.
Make use of expense tracking software
Using expense tracking apps will allow you to better understand your spending habits. Categorising expenses will help you spot wasteful spending and find strategies to save. Furthermore, keeping a track of expenses over time will help you stay disciplined. 
Reduce expenses 
If you buy things you do not need, soon you will have to sell things you need” – Warren Buffet
The discipline to start and maintain a savings strategy is key to attaining your financial goals. One of the most important component of saving plan's is cutting costs.

Wait before buying – An impulsive buy occurs when you buy something you didn't intend to get. Sometimes we buy things because they are on sale, or we are emotional, or we have recently received a bonus. I'm sure we've all bought things on sale that we never used. We can avoid such purchases if we wait a day before acting on it.

Calculate cost per use – Purchasing the least expensive solutions is not always the greatest approach to save money. It is preferable to make purchasing decisions based on effective cost per usage.

Example –  Fast fashion clothing bought at a discount store that lasts 20 wears may end up costing more in the long run than purchasing high-quality clothing that will last 100 or more wears.

Rent vs buying – The cost of each use decision technique is also used to determine whether to rent or own an item. Consider buying or renting a car as an example – the expense of operating and maintaining a car can be too expensive when compared to hiring Ola/Uber on a regular basis if you use the car infrequently. Aside from obvious operating costs, there are hidden and important expenditures such as interest and depreciation in the car's value that are typically overlooked when making a decision. Typically, hiring Ola/Uber is less expensive for those who drive less than 1000 kilometres per month. 

Automate your savings 

“Do not save what is left after spending, but spend what is left after saving”
– Warren Buffet

Automating them is a simple method to save money. Various investment products, such as recurring deposits, systematic investment plans, provident fund contributions from salary, and so on, can be used to automate savings. By turning your savings into investments, you can avoid the temptation to spend unutilized funds in your bank account, making the savings sustainable over long term.

Grow your savings – Grow your savings by investing in suitable asset class based on your risk and liquidity requirements. Always select an asset class that has the potential to outperform inflation (after taxes). Once you've found a good asset class, stick with it and reap the rewards of compounding.


Author: Neha Juneja


Other Blogs

Impact of rising interest rates on your investments



Inflation has risen across the globe to become a pain point for policymakers who grapple with rising prices and faltering economic growth. Things seemingly turned worrisome when the Reserve Bank of India (RBI) raised the repo rate by 40 basis points on May 4 and again on June 6.  With the growing interest rates, should investors like you need to worry? What should be your strategy towards investment during such times? Let’s find out.   First, let us revisit the connection between inflation, interest rate, bond yields etc.   Inflation and interest rates are directionally related, i.e. they tend to move along the same trend but with some lag. RBI and other central banks desire positive but manageable inflation rates. A negative inflation rate or deflation means degrowth in the economy because with rapidly decreasing prices, consumers tend to pause/postpone their spends leading to slowdown in economic activity.   Fundamentally, the supply and demand...


What is the tax rate on my investment? - June 2022



Many of us are unprepared for the tax payouts applicable to our investments and forget to factor them in.    Here's a ready reckoner to help you estimate your 'post-tax returns' and compare investment options.   Tax Rates on Your Investments   Tax Type  Short Term Gains  Long Term Gains Equity mutual fund  Post-tax earnings are added to your income and taxed as per your individual tax slab. 15% + 4% cess 10% + 4% cess (LTCG >1 year) Debt mutual fund  Post-tax earnings are added to your income and taxed as per your individual tax slab. At the tax slab rate of the individual  20% + 4% cess with indexation (LTCG >3 year) Equity  Post-tax earnings are added to your income and taxed as per your individual tax slab. 15%  10% over and above Rs. 1 lakh without indexation (LTCG >1 year) Debt Listed At the tax slab rate of the...


How does IndiaP2P offer such high returns with low risk?



How does IndiaP2P offer such high returns with low risk?   IndiaP2P’s first-of-its-kind return-risk profile is the result of a unique yet large arbitrage opportunity that exists in the debt markets of emerging economies such as India.   First, let’s recap how the equity and debt markets differ. While retail investors have had access to equity investments for long, debt has been gaining in popularity over the last decade.   Read on…   We all have come across the terms debt and equity quite often. And while we may use them in the same breath, they are actually quite different. Equity is the process of raising capital by selling a portion of shares from the business.  For example, you receive a certain amount of capital infusion in your company in the form of equity. This means that you don't have to repay the amount later. However, the investor receives a portion of shares. Hence, they will receive profits in sync with their...


Featured In

Have more questions? Click here to schedule a quick call with our investments team


Start Investing