Budgeting Tips for Managing Your Money in 2021

The year 2020 was a tough one for all. When a lot of people were worried about their health, there were those, too, who were more concerned about their unstable finances. If you, too, feel stressed out and worried about your financial well-being more than you do about your physical health, don’t fret, for you are not the only one. A survey conducted in January 2021 stated that people around the globe were more worried about their money management than their health issues last year.

The reasons behind this anxiety are straightforward: loss of jobs, depreciation of incomes, and stagnancy in businesses. This is what most of us faced last year and are still experiencing after the onset of 2021, too. Keeping in view the current scenario, managing money skill-fully with a structured budget could be a smart move to adopt. Whether it is the yearly plan you want to sharpen or control the cash chaos, these tips shall come in handy for you.

You can also download a few apps to do the job for you, but managing your finances with the given money management tips could save you a lot. Let’s check them out.

1. Goal Setting

We have just discussed the importance of saving money in 2021 following the chaos in 2020. But how do we manage to do that? Yes, by setting achievable and measurable goals. Setting vague goals could only fetch you ambiguous results. Setting measurable goals, instead, would help you manage your funds far more resourcefully. This would, of course, need a lot of planning and research. For example, instead of setting a vague goal to save more money in 2021, you might set a realistic goal of saving at least two lakhs by the end of the year for the down payment of a home loan. To further achieve this goal, you might consider setting smaller saving goals of around 17 thousand every month. Thus, you should aim at setting measurable targets:

• Setting a Goal - What is your financial goal?
• Approximate Cost - How much money is needed?
• Time-lapse - How much time is required to achieve that goal?

Once your bigger picture is set, you can start working on the smaller ones. In this process, you will need to prioritise the targets according to your savings and needs.

But before you move ahead and plan further, make a quick note to yourself. And the note should read - “Emergency Fund.” This fund should consist of small savings accumulated in a secret account. The amount saved could be utilized in the future for any medical emergencies or when life turns hard on you.

2. Jot down your budget

You can track the budget and its figures in an excel sheet or do it in a budgeting app like YNAB. What matters more than beginning to track your finances is a strong motivation to keep it going. The best way to structure a budget is to first understand your spending habits. The expenses could be possibly divided into two parts, namely -

• Fixed - the recurring ones like rent, EMI, subscriptions, etc.
• Flexible - the ones which fluctuate from time-to-time, like shopping, dining out, etc.

Checking out your recent credit card and debit card bank statements would give you a clear picture of how you could differentiate the spending structure. Once you understand how much you make and how much you spend, you shall understand how to allocate money to your different goals.

3. Analyse your spending habits

Studying your spending habits and generating a plan is one of the best saving tips that could come resourceful.

We aren’t telling you to cut down on the things that buy you happiness, but it is better to understand a few aspects with a deeper sense. You don’t need to stop buying that special chocolate cake every Friday. However, you do need to think about the hefty car instalment weighing down on your budget. Focus on the recurring payments, like house rent, if it is eating up half of your monthly pay-check and consider shifting to a different spot that is more affordable and helps you save more.

4. Curtailing expenditure

The best way to increase your savings is by cutting short the unnecessary expenses. The biggest two expenses that could be easily curtailed are often shopping and dining out. Buying what is absolutely necessary and occasionally dining out could help you minimise your spendings. Also, in the ongoing post-pandemic times, frequently dining out might bring down your immunity and add to your medical bills. Thus, controlling these expenses is a good idea.

5. Automate your Payments

Now that you have worked out a plan and studied your spendings, it is the right time to automate your payments. Most of the websites and portals have a scheduler for payments, like ECS or standing instructions. Utilise those and regularise the payments easily. Once your financial situation has improved, you could also minimise or cancel those automated payments.

6. Manage your debts

Keeping debts isn’t a bad thing but saturating them is one. Thus, you need to analyse the debts that hold you back from enjoying the fruits of other managed money goals. An overwhelming urge to spend could overpower your thoughts, but you must understand and control the expenses that are simply avoidable. You can pick from the two options of either restructuring your debts or amalgamating your funds. For restructuring your debts, you can redo the loan and try to decrease the rate of interest, or perhaps change the duration of the loans. The other option is to merge your various loans and pay just one instalment.

Studies have shown that almost every household has a debt overhead. And this leads to increased stress levels, depression, and lowered physical health. Hence, understanding your debts and smartly managing them could help you look after your mental health.

7. Start investing

Making the right Investments is one of the most valuable finance tips we can suggest to you here, for only increasing the savings will not help you much but reinvesting them will definitely be fruitful. When you plan to invest, always keep in mind that time is money. In what commodity you invest is not important, but when you invest is.

Investing in share markets or mutual funds can turn a bit dicey and speculative. Thus, investing in fixed deposits or recurring deposits could be a safe way out.  This method might be lengthy and time-consuming, but it repays a good consolidated amount in the future.

8. Keep changing

In three months, you might feel that you need to go out with your family more or change your job or maybe refurbish your home. Thus, you need to keep amending your budget goals and re-plan from time-to-time. Keep track of your expenses for the entire previous year. Celebrate the months when you crushed your goals and, at the same time, not feel depressed when you couldn’t hit the mark. Life is meant to be full of ups and downs, for a straight line would only imply its end. Thus, keep track of your plan and render changes whenever required.

9. Get professional help

At a given time, if you feel that you are stuck and do not know the way out, it’s time to take help from an expert. Take strategic advice from a CA or a finance consultant. This shall help you analyse and understand the situation better and make requisite changes to the goal mapping.

We are aware that in times of crisis, it becomes essential to manage your cash and credit flow. Thus, understanding these money management tips and mapping them into your life could help stitch the loopholes.

Any budgeting plan is not entirely fool-proof or perfect. Hence, you need to tweak every plan and frame it according to your personal goals and needs. These tips can render a structure to your haywire finances by building a proper plan that is achievable. Always keep in mind that when you have planned finances in place, life becomes way too easier, and tiny happy moments can be turned into bigger celebrations with proper money management.

Especially after the pandemic, it has become extremely vital for all of us to take care of our expenses and keep an emergency fund ready for the uncertainties we might have to face in the near future.

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