Outlook English - Print Subscribers Copy Outlook English, 30 July 2018 | Page 21

budget also acts like an alarm system,
alerting you with information about
your expenses if things are going off
track so that your savings efforts for
the future don’t get impacted into different heads, along with setting
a budget and warning you if you
exceed, or are close to exceeding it, “
says Dhawan.
Taking the stress out of
budgeting To make your home budget an
effective tool for your wealth creation,
apart from creating the budget, you
need to take some other steps within
the budget and outside it as well.
“While designing the home budget,
it is important to remember that the
frequency of expenses may vary.
Some are daily in nature like small
purchases, to those that are weekly
like groceries and then there are
monthly expenses like utility bills.
There are also quarterly and half
yearly expenses like fees, besides
annual expenses like vacations,”
points out Dhawan. “Building a home
budget simply on expenses that
come up monthly is likely to cause an
underestimation,” he warns.
Dhawan also suggests that an
amount equal to the documented
expenses is transferred to a separate
account. This ensures detection of any
case of overspending automatically.
Of course, this doesn’t mean that your
expenses under certain heads can’t
show sudden spikes. The advantage
of the budget is that on reviewing it
periodically, as you should do, you will
notice such spikes and will be able to
examine the reasons.
So, how do you deal with sudden
spikes in expenses over budgeted
amounts? After all there will be
sudden expenses related to social
functions and during festive seasons.
Sadagopan suggests that inside the
budget you need to have a head
called “miscellaneous” to cushion
against such expenses. You also need
another head. “One should have a
liquidity provision which one may
be able to dip into when unforeseen
expenses like sudden travel, illness
and guest visits that come up and
expenses that go far beyond what
was planned, “ adds Sadagopan.
Talking of making provisions of
emergencies, one of your budget
Despite the obvious benefits, thanks
to their hectic lifestyles, many people
may find recording their expenses
too cumbersome. One of the ways
to reduce the stress is to cover major
heads of expenses—the broad heads
should be able to cover all your
expenses. This can help you zero
down on any item that comes under
the broad head, if the need be. So,
if your expenses under the head
of entertainment balloons up, you
might examine it closer and find the
cause to be you hosting your parents’
anniversary party. It could also be
frequently dining out, a situation you
might want to address.
To cut the stress out of budgeting,
you could consider online tools
and apps like Almond and Money
View t o name a view, which offer a
host of features. “Online tools allow
importing of bank statements directly
and even allow them to be classified
Rajesh Sud
Executive Vice Chairman &
Managing Director,
Max Life Insurance
“I firmly believe that
premium for term life
insurance plans and
health insurance plans
should be part of any
household’s essential
expenditure.”
Budget right
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Why You Need a
Home
Budget
■ Ensures expenses remain well
within your income
■ Helps to regularly set aside
money for major future needs like
buying a home, children’s higher
education and retirement
■ Assists you in planning for
emergencies and pay premiums
for different insurance plans
Smart
Home
Budget
Tips
■ Ensure all your expenses are
covered by the budget
■ Create a budget head for
unplanned expenses
■ Be mindful of frequency of
different expenses in the budget
■ Consider using online budgeting
tools and apps such as Walnut
and Money View
■ Keep amount equivalent to
documented expenses in a
separate bank account to prevent
overspending
■ Periodically review unplanned
expenses besides spikes or dips in
regular expenses; take follow-up
action if required
■ To ensure uninterrupted regular
investments, make a financial
plan covering major future needs,
invest first, and then attend to
the various expenses
30 July 2018 OutlOOk 21