We all are aware that on every 28th February, Finance Minister presents budget in the parliament. The exercise is done months before and on budget day FM makes it public, where the money has come from and how it is spent in the current year. Budget also tells us what are the estimates for the next financial year. This is very important for all of us, whether it’s individual, corporate or institution, to know the steps taken by government to take economic growth on fast track. Even world take serious note of our budget. Same way every businessman prepares profit & loss account and balance sheet at the end of financial year of his co. and he comes to know how healthy his business is. One can’t imagine any country or business runs without proper budgeting.
Like wise individual family budget is also most important and is the basic and foundation of individual financial plan. It is really about knowing how much you earn month to month and how it is spent in day-to-day life expenses. A good budget can help you in keeping your expenses as required and keep it on right track. One should write it down on daily basis and know where money is spent. Unless you write it down, you will never be able to formulate an investment plan, as surplus is not known to you. If you don’t know how much money you have coming in and where it goes, your road to financial success will be a difficult one.
Budget Allocation Guidelines:
1) Fixed Expense: Your fixed expenses should be in the range of 40 to 50%. Fixed expenses include household expenses, education, medical, utility bills, fuel, conveyance, repairs & maintenance.
2) Insurance Commitment: Your total commitment towards life insurance should be around 6 to 7%, health Insurance around 3 to 4%, accident insurance and household property another 2%. Insurance expenses for the year should be around 10 to 12% of your annual income.
3) Retirement Corpus: One must save minimum 10 to 15 % of total income for retirement. Living longer is also a big problem and has to be addressed at earliest.
4) Long-term investment: Money set a side for education & marriage of children’s, home purchase or major renovation. One must keep a side 15 to 20 % for his future goals.
5) Annual Vacation: Your annual vacation should also be restricted to 5% of your total income.
6) EMI: Borrowing has become very common now a day for home purchase, car, and education. EMI can spoil your financial plan if your calculations go wrong. One must be very careful before taking any loan and EMI should not be more than 35% of your income.
Particulars
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Total Monthly
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Total Annual
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Net Take Home Salary
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Business/Profession Income
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Rental Income
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Investment Income
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Agriculture Income
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Total Inflows
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Household Expenses
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Food & Grocery
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House Rent / Maintenance / Repair
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Conveyance & Fuel
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Medicines / Doctor / Healthcare
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Electricity / Water / Cable / Mobile
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Children's Education
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Lifestyle Expenses
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Clothes & Accessories
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Dining / Movies
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Travel & Vacation
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Loan EMI's
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Home Loan
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Vehicle Loan
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Educational Loans
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Insurance Premium
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Life Insurance
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Health Insurance
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Other Insurance
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Total Outflows
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Surplus
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This article first appeared at myiris.com on 5th April'2011
