Outlook English - Print Subscribers Copy Outlook English, 30 July 2018 | Page 22

heads also needs to cover insurance
premiums. Remember, if you are
unprepared for large emergencies
like a major accident, your budget will
surely go for a toss. “I firmly believe
that premium for term life insurance
plans and health insurance plans
should be part of any household’s
essential expenditure,” says Rajesh
Sud, executive vice chairman &
managing director, Max Life Insurance.
Rectifying expense
patterns for regular
savings
For many people embarking on
a budgeting exercise, examining
existing expenses or reining them
in can be quite a task since many of
them are essential expenses. “It is
critical to look at the components of
lifestyle expenses within the essential
expenses itself. For example, having a
mobile phone today may be essential,
but the choice of brand or model and
frequency of changing the mobile
phone is flexible,” points out Dhawan.
“We find that separating out the
lifestyle led expenses and evaluating
the frequency and quantum of these
before spending on them, can make a
Vishal Dhawan
Founder and Chief Financial Planner,
Plan Ahead Wealth Advisors
“Regular investments
without a well thought
through home budget
will either result in
cash flow deficit and
disruptions in regular
investments, or
underinvestment that
can compromise some
financial goals.”
22 OutlOOk 30 July 2018
very significant difference,” he adds.
A home budget provides you with
actionable information on how your
money is being used. So, while you
might be able to identify expenses
that can be pruned, there could
be expenses that start to occur
periodically. For instance, sports
coaching camps during vacation for
your child. In such cases, you will
need to start providing for them in
your budget. In that sense, a budget
mirrors your life since it captures the
changes in your financial world. Thus,
your budget keeps changing with your
changing financial realities. This is also
the reason everyone’s home budget
will be unique. “There is no one-size-
fits-all when it comes to a budget,”
says Vishakha RM, managing director
& CEO, IndiaFirst Life Insurance.
Wealth creation and
your budget
As we have mentioned, a home
budget helps you in your efforts to
have a balance between meeting
today’s needs and securing tomorrow’s
dreams. The key contribution of the
budget in the construction of your
tomorrow is savings. The proof of
the efficacy of good budgeting is its
ensuring regular savings. “Regular
investments without a well thought
through home budget will either
result in cash flow deficit and
disruptions in regular investments, or
underinvestment that can compromise
some financial goals,” says Dhawan.
So, how does one ensure this
uninterrupted supply of savings?
Experts suggest that you first make
your regular investment contribution
and then use your remaining income
to meet current needs. “Households
should allocate a fixed portion for their
savings from their disposable income.
Whatever is left should be used for
discretionary expenditure,” says Sud. Of
course, taking this course means doing
a few important things.
First, you need to identify your
various important needs that will arise
in the future. Then, you will need to
figure out the regular amount you
need to make with the time at hand.
Suresh Sadagopan
Founder,
Ladder 7 Financial Advisories
“A budget helps one
to stay disciplined and
not overspend. Only
when this discipline is
established can one
go about investing
without worries.”
This will give you an idea of the amount
of money left to meet your current and
imminent expenses. One of the ways
of ensuring the regular investment
discipline is to opt for investments
whose contributions get debited directly
from the bank account. For instance,
systematic investment plans (SIP) from
mutual funds offer this facility where a
fixed amount regularly gets deducted
directly from your bank savings account.
When seen from a distance, a budget
doesn’t look like the “in thing” that you
would like to be involved with. At the
same time, it establishes a system where
you can get the most out of your money.
This includes your various expenses even
as it helps you ensure that your future
requirements get the required emphasis.
Above all, it instils financial discipline that
helps you balance current and future
needs. “Financial discipline, like common
sense, is very rare,” says Vishakha RM. This
also makes budget an invaluable tool. In
the end, the budget proves yet again that
some of the most important things that
we aspire for, require us to do that some
simple and boring things and too, very
regularly. But when it comes to making
your money travel that extra mile, you will
surely not se