It is now time to forge a new path forward with your finances. Although budgeting may not have worked for you earlier, colour-coding your budget is your new budgeting lifesaver!
Let’s start! Let’s work on creating your monthly budget. Whoa, wait! Did you just roll your eyes, or did you snort with derision? We get it. For many, trying different budget management methods has either not worked or they just despise the many restrictions that come along with it.
If you are trying to rein in your daily and monthly spending, there is one fool-proof way that will make managing your money a breeze – it’s colour-coding! This Holi, let us celebrate the small steps you take towards financial freedom. Interested to learn how you can colour-code your budget to understand your spending habits? Read on to know more.
In an effective multi-coloured budgeting system, you group comparable spends, income and miscellaneous expenses by assigning a colour to each. This makes it easier for you to discern where your money comes from and where it goes.
Additional Reading: 5 Surprising Signs That You Need to Re-Evaluate Your Financial Planning
Compile All Your Bills And Receipts
Before you get started, take out a few hours if necessary and de-clutter your paperwork. Manually organise your bills and receipts systematically in a folder – also account for cash transactions.
Choose The Right Colours For Your Budget
Define and assign colours for your spending habits. Choose colours that do not make you feel lethargic about the whole budgeting process. Be careful not to have too many categories. Opt for one colour for groceries and food, one for rent and necessary household bills like electricity, water, and internet, one for transportation like public transport costs and petrol, one for savings, and another for non-essential expenses, such as shopping. Highlight each and every expense
- Colour #1: Colour code the opening and closing balance for your bank account – be it daily or monthly.
- Colour #2: Colour code your income and its sources if applicable. Make a note of the total.
- Colour #3: Colour code your monthly payments. EMI, house rent, utilities, Wi-Fi, etc. Make a note of the total.
- Colour #4: Colour code your most common expenses. This will most likely be groceries, food and other miscellaneous household items. Make a note of the total.
To determine exactly where your money is going every month, add each highlighted expense in a colour category and its total. Create and set the budget for the next month based on your current spending habits. Any category with the highest total should be re-evaluated to ensure the expenditure is reduced in the upcoming months.
Additional Reading: Personal Finance 101: Save More Money Without Even Realising It
Colours And What They Signify
- Red: Red represents any immediate action that should be taken; any overspending in the budget allotted. You can opt for any other colour too!
- Yellow: Yellow can represent an underfunded category or insufficient balance. Either you’ve overspent or you haven’t been assigned enough for an upcoming transaction.
- Green: It’s all good! Green represents positivity and can represent incoming transactions. You are on track!
- Blue: Blue represents trust, dependability, and security. You can use this to signify savings, investments, or other emergency funds.
Take a good look at your expenses and ensure you are not spending more than you earn, or more than your budget by identifying categories where you can cut back. Whether it means cancelling a streaming service like Netflix, or ordering food on the regular, you should be able to quickly figure out where you can save extra cash every month.
Continue Tracking Daily
From now onwards, use your new colour-coded budgeting style and always keep your expenses and budget in check. If possible, colour-coding your expenses every day will help you in the long run and will not leave you scrambling at the end of the month. This will ensure you stay optimistic and motivated to see your financial plan through.
So, in a nutshell, once you have assigned your colours and have your financial statements i.e., bills, debit and Credit Card statements handy, you are all set to get started! Include a checklist of your monthly spending categories like bills to be paid, groceries, and travel. Now that you know exactly how much you’re spending on both essentials and non-essentials, use this information to create a new monthly budget to adhere to.
Now that you’ve taken the first step towards a financially secure future, also ensure that you are prepared for uncertainties that may come knocking with Personal Loans on BankBazaar.