Five tips for creating a budget to support your financial goals

Creating a budget to meet your life goal is an essential part of financial planning and financial security. Whether you want to save for you new home or car, repay loan, create an emergency fund or save for a family trip, creating a balanced budget is the first step for ensuring your financial security.
Budgeting is not very different from improving from eating habits or exercising - everyone advise you that it's good for you, but it's hard to follow. Much like going to the gym, the toughest part is breaking the inertia. You have to just decide that you're going to try it out. If you are also the one who plans a lot but fails in the execution phase, here are five vital steps you should follow to create a budget:

1. Create a list
Writing down or creating a list of all of your expenses is key. You should record every penny and never try to approximate your expenses. Approximation can lead to errors.

You can follow any method, whether that's writing it down on paper, creating an Excel spreadsheet or using a website.

After creation of this list, you should categorize the expenses to plan where your income should be spent. You can start planning with covering your basic needs.

As per financial experts, you can follow the 50-30-20 rule for budgeting, where 50% of your income is marked for necessities like food and rent, 30% for things you want, and 20% for savings and debt repayment.

This method works for many people, but it might not be right for you if necessities eat up more than 50 percent, in that case you'll need to allocate less for savings or things you want to do or buy.

2. Budget Format
You can create a simple list of your after-tax salary and then add your expenses in a notebook or a blank spreadsheet to create your budget. But if you don't get motivated with plain numbers you can take help of some visualisation resources in the form of charts and graphs to know what's going out, and what's your saving.

There are lots of online templates that'll help you look at spending categories and expense categories for personal finance.

3. Make a Realistic Plan
If 50-30-20 isn't realistic for you, there are still other ways you can follow to save and tackle financial need. Start setting aside small quantities of money every month or set small goals, such as choosing a restaurant where you won't spend more than a set amount.

Small steps go a long way in fulfilling your financial requirements. It's about progress, not perfection.

You can start with one goal each week, whether that's saving a certain amount or reducing the amount you spend on non-necessities.

But you should remember not to overcomplicate the planning.

If your income just covers your necessities, reducing credit card debt can be challenging. Even if you live paycheck to paycheck, you might want to add at least Rs 100 above the minimum payment of your credit card with the highest interest rate. And if you can afford, you should start paying 10% more than the minimum payment per month.

4. Make a Habit
To achieve your financial goals through a budget, you have to change your mindset. You have to look deep inside yourself and say, am I willing to change my habits?.

Once you are mentally ready, you can start setting goals.

a. Set a time goal
Building new habits can be tough, but following it for the rest of your life can be daunting.

To overcome this real challenge, you should aim to follow your planned budget for two weeks. After achieving that, you can set a longer timeline, such as 30 days or six months, until it gets embedded in your habit.

b: Gamify your budget
Despite doing all this, if you're still struggling, you can try gamify your budget and turn it into a challenge.

You can challenge yourself to achieve a goal. For example, you can say if we save enough money, we can get a new TV or go on vacation.

Examples of gamification include giving yourself a small reward after a certain amount of time or money that you have saved.

5. Involve Family or Friends
As with any lifestyle change, having people around you to support your decisions and encourage healthy habits is crucial. This may include talking with your near and dear one about your finances, telling your friends that you will start budgeting, or explaining to your children how the family is now spending money.

Using cash when going out with friends helps. If you only take Rs 1,000 out with you to a restaurant and don't bring your credit card, and you want to order more but you only have Rs 100 left, you simply can't spend any more.

You need everybody who's involved in those decisions, to commit with you to be supportive of it.