Know where you stand
The first step is to analyze your monthly income. The gross figure should include all the incomes generated from the working members in your family.. Do remember to add refunds, bonuses, rent, interest, capital gains as well.
Know your spending:
This process can be carried out in two ways; either you keep a track of each rupee that is going out of your pocket or you can divide your expenses into fixed and variable expenses. Under fixed expenses you can enlist your EMIs on a home loan or a personal loan that you are required to pay monthly, and variable expenses can include your monthly bills, shopping bills etc.
Analyze and act:
Once you keep a track of it for a month, you will get an idea where you expenditure is high and try and curb them effectively. Doing this can considerably reduce your chances of getting into another debt, as with the help of this budget, you can plan your investments by opting a systematic and planned savings’ pursuit to achieve you future goals without taking a loan.
Save, repay debt and investment:
Once you have achieved the above categories, ensure that you set aside a considerable amount of your savings as a contingency fund that is approximately 3-6 months of your expenses. Prepay unsecured debts such as a credit card debt or a car loan as they do not offer a tax benefit. Atleast 10% of your salary should be saved beyond the provident fund cuts and other deduction linked investments.
Evaluate and alter:
Every time the financial situation alters, even your budget needs to be altered accordingly so that any discrepancies arising out if it can be corrected immediately, enabling you to have a stress free savings and investment plan.