A SIMPLISTIC APPROACH TOWARDS HOUSEHOLD BUDGET MANAGEMENT
Problems/Issues:-
1. Money is seldom enough and never surplus, especially for salaried government employees.
2. Budgeting and maintaining day to day accounts is a bloody cumbersome process.
3. Saving vis-a-vis spending on monthly basis remains a dilemma always and every time!
Terms of Reference
1. No complex math calculations.
2. No fixed minimum income.
3. Some saving irrespective of the income.
Household Budget. I am referring to the expenses related to domestic chores and NOT related to your investments, insurance and even children education expenses since all such expenses can be predicted and can be set aside initially itself.
Background. We are a working couple, both in govt jobs. When we started our married life, there was always a dearth of money since EVERYTHING had to be bought. That was an era of low salaries and high costs. But even when we had everything that we needed and even when our salaries got hiked intermittently, our main problem remained - virtually penniless towards later half of the month in the worst case and last week in the best case.
A simplistic approach. Cutting out the stories about all our failed attempts (all of us do all those stunts to exercise control over our expenses sometime or the other during our lives), I will come to the simplistic solution that has worked for us. The following needs to be done (Remember, there is no minimum lower limit)....
1. Simple Addition. Whether you are the only earning member or both of you are working, there would always be a 'Take Home' income, i.e., income in hand/bank that is handed over/credited into your bank account. So, you have such an income after all your standing dues have been taken out; standing dues will include PPF, recurring accounts, insurance premium (duly divided into 12 equal parts), any loan (EMIs), likely IT payments (equated into 12 portions), school fee, house rent, servant/driver/watchman wages and so on. Once you have taken out inevitable expenses (some would have been deducted by the employer automatically, some may be taken away by bank because of your standing instructions and some you would need to keep separately. But you need NOT take out monthly domestic expenses like milk, newspaper, LPG and so on), just add all such incomes (unless you are the only member). Let us say the sum total is Rs 'X'.
2. Defining the Limits. Now, simply select any figure that is less than 'X' say, 'Y'. Here 'Y' includes your monthly Pocket Money and any minimum monthly savings (optional) you ASPIRE to have. Taking out the pocket money will help the working member/couples to cater for personal expenses related to work and day-to-day life, e.g., telephone bills, conveyance/car fuel charges and any expenses on tea and refreshments. So, X-Y= Z. You have now decided to limit your domestic expenses to a maximum of Rs 'Z'.
3. Compartmentalisation. Now simply divide 'Z' by 31 to get a figure = 'D'. This is your daily permissible expenditure on household chores. Depending upon your X, the value of D would vary and would be in line with your income. Now, please withdraw this amount from your bank either in one go on 01 of a month or in two or three equated instalments on 15/10th of the month. You can staple the currency notes and mark dates on each portion of simply make 30/15/10 compartments in an empty shoe box and place the daily allowance accordingly.
4. Spending. Time now to spend..... Every day, spend from the marked compartment. So, on 01 March, spend from the compartment meant for 01 March and in case there is any amount left balance, keep it back in the cell. But there will be occasions, especially during first 7-10 days of the month, when you will be exceeding the daily budget, D, for a day. In such a case, spend from the compartment of that day, then use the leftovers from the previous dates (if any) and then from the immediately next dates that are yet to follow. Aim is not to curtail further but to REALISE the fact that you have been saving or over-spending on daily basis.
4. Taking Stock. One would need to take stock periodically, especially, during initial months of this regime. Once a week will suffice. Actually, there is no need to have a very elaborate analysis; just one look at the compartments will tell you as to where do you stand. So, at the end of a week, if you see some currency still lying unexpended in the compartments meant for the days gone-by, you can always afford to have an evening or a meal outside. If you are already spending from the compartments that are yet to come on the calender, you need to think a bit. In latter case, either re-work out the D (if it is beyond control because of its inevitability) or simply slow down (if that is feasible). At the end of the month, if you have some leftovers, withdraw that much less amount from the bank/ATM on 01st of next month.
Miscellaneous Issues. There will be times when you will be spending through your credit/debit cards. On occurrence of such expenses, take out an equivalent amount from the concerned compartment and keep it in a separate compartment (call it 32nd compartment) and mark it for credit card payment on due date or mark it as advance drawn from the bank for the next month (that much less will be drawn from the bank during the next month).
What is Being Achieved?
1. A realisation that we are saving or spending in excess, on daily basis. This is something akin to the first principle of losing weight...being aware!
2. One time calculation of D (subject to one odd revision during initial months) will help you rid of a need to plan on daily basis.
3. A pattern will emerge over a period of time and you will understand the needs and supply equations better.
Terms of Reference
1. No complex math calculations.
2. No fixed minimum income.
3. Some saving irrespective of the income.
Household Budget. I am referring to the expenses related to domestic chores and NOT related to your investments, insurance and even children education expenses since all such expenses can be predicted and can be set aside initially itself.
Background. We are a working couple, both in govt jobs. When we started our married life, there was always a dearth of money since EVERYTHING had to be bought. That was an era of low salaries and high costs. But even when we had everything that we needed and even when our salaries got hiked intermittently, our main problem remained - virtually penniless towards later half of the month in the worst case and last week in the best case.
A simplistic approach. Cutting out the stories about all our failed attempts (all of us do all those stunts to exercise control over our expenses sometime or the other during our lives), I will come to the simplistic solution that has worked for us. The following needs to be done (Remember, there is no minimum lower limit)....
1. Simple Addition. Whether you are the only earning member or both of you are working, there would always be a 'Take Home' income, i.e., income in hand/bank that is handed over/credited into your bank account. So, you have such an income after all your standing dues have been taken out; standing dues will include PPF, recurring accounts, insurance premium (duly divided into 12 equal parts), any loan (EMIs), likely IT payments (equated into 12 portions), school fee, house rent, servant/driver/watchman wages and so on. Once you have taken out inevitable expenses (some would have been deducted by the employer automatically, some may be taken away by bank because of your standing instructions and some you would need to keep separately. But you need NOT take out monthly domestic expenses like milk, newspaper, LPG and so on), just add all such incomes (unless you are the only member). Let us say the sum total is Rs 'X'.
2. Defining the Limits. Now, simply select any figure that is less than 'X' say, 'Y'. Here 'Y' includes your monthly Pocket Money and any minimum monthly savings (optional) you ASPIRE to have. Taking out the pocket money will help the working member/couples to cater for personal expenses related to work and day-to-day life, e.g., telephone bills, conveyance/car fuel charges and any expenses on tea and refreshments. So, X-Y= Z. You have now decided to limit your domestic expenses to a maximum of Rs 'Z'.
3. Compartmentalisation. Now simply divide 'Z' by 31 to get a figure = 'D'. This is your daily permissible expenditure on household chores. Depending upon your X, the value of D would vary and would be in line with your income. Now, please withdraw this amount from your bank either in one go on 01 of a month or in two or three equated instalments on 15/10th of the month. You can staple the currency notes and mark dates on each portion of simply make 30/15/10 compartments in an empty shoe box and place the daily allowance accordingly.
4. Spending. Time now to spend..... Every day, spend from the marked compartment. So, on 01 March, spend from the compartment meant for 01 March and in case there is any amount left balance, keep it back in the cell. But there will be occasions, especially during first 7-10 days of the month, when you will be exceeding the daily budget, D, for a day. In such a case, spend from the compartment of that day, then use the leftovers from the previous dates (if any) and then from the immediately next dates that are yet to follow. Aim is not to curtail further but to REALISE the fact that you have been saving or over-spending on daily basis.
4. Taking Stock. One would need to take stock periodically, especially, during initial months of this regime. Once a week will suffice. Actually, there is no need to have a very elaborate analysis; just one look at the compartments will tell you as to where do you stand. So, at the end of a week, if you see some currency still lying unexpended in the compartments meant for the days gone-by, you can always afford to have an evening or a meal outside. If you are already spending from the compartments that are yet to come on the calender, you need to think a bit. In latter case, either re-work out the D (if it is beyond control because of its inevitability) or simply slow down (if that is feasible). At the end of the month, if you have some leftovers, withdraw that much less amount from the bank/ATM on 01st of next month.
Miscellaneous Issues. There will be times when you will be spending through your credit/debit cards. On occurrence of such expenses, take out an equivalent amount from the concerned compartment and keep it in a separate compartment (call it 32nd compartment) and mark it for credit card payment on due date or mark it as advance drawn from the bank for the next month (that much less will be drawn from the bank during the next month).
What is Being Achieved?
1. A realisation that we are saving or spending in excess, on daily basis. This is something akin to the first principle of losing weight...being aware!
2. One time calculation of D (subject to one odd revision during initial months) will help you rid of a need to plan on daily basis.
3. A pattern will emerge over a period of time and you will understand the needs and supply equations better.
A look at Our 'D- Box'
Comments/Suggestions are invited please.
Regards
Ajay K Raina
Comments/Suggestions are invited please.
Regards
Ajay K Raina
