Every day you come across hundreds of articles on budgeting your expenses. Financial advisors also give you numerous strategies to budget your expenses. You make your own plans for spending money and call it a budget. What does this word called ‘budget’ which has assumed colossal importance in the present economic times mean to you? Different people use different tools to make their budgets. I simply jot down my money plan in a notebook, but my friend uses Mintblog financial tools to make his budget. Ultimately what matters is not the tools that you use for designing your budget but what you have intended to spend on and what you have actually spent on.

Spending without budgeting is like eating without keeping a track of how much you eat. Just like a diet plan, you need to create a budget which lets you know how much you are spending and where your money is going. By budgeting you assume a proactive role in managing your money. It’s not your expenditures that determine your savings, but vice versa. When this happens you are always safe with your money. A budget helps you in determining your financial goals. Making a mental note of your financial ambitions is not enough. Anything documented shows a concrete plan that you’ve made for your monetary future. Every expenditure gives you a clear idea of how much you are in line with your determined goals. The budget clarifies your concept of how much you actually earn, how much you actually spend, your major expenditures and weather your spending pattern is proactive or reactive.

When you make a budget you’ll realize that budgeting is not actually about saving, but actually about spending- i.e. spending right! As I said earlier, budgeting is so much like watching your weight. It’s not like eating less and becoming an anorexic. It’s like eating right-i.e. spending right. Budgeting is not about hoarding money, it’s about establishing a balance between your saving and spending.

As a rule of thumb, any budget should make you spend less than what you earn. Just sit with a calculator and sum all your expenditure and subtract it from your net income. See how much you are saving. When you jot down your expenditures you’ll come to know that you might be spending more on unimportant items than important ones. Overspending is not about spending more in general but about unnecessary expenditure.

Budgeting is not about restricting your expenditure and denying yourself the pleasure of entertainment If you know how much to spend on each category, you’ll have money to spend on entertainment too. Set aside a fixed amount of your income for entertainment and stay within the amount defined by you. Good money management starts with good budgeting. In your budget along with money for entertainment, set aside some amount for personal expenditure too. Don’t deny yourself items like clothing and accessories. This is in no way extra expenditure. Above all, learn to live within your means.