Be it amidst crisis situation or in normal circumstances, creating budgeting goals is a key aspect. In this blog, we take a look at how and why budgeting should be done for short-term and long-term goals
Budgeting is an important aspect of personal finance
Budgeting is considered as one of the most important factors towards maintaining financial wellbeing. Be it a crisis situation like the COVID-19 where saving money is of paramount importance or be it a normal routine life, budgeting wisely will always help you achieve your short-term and long-term goals. There are so many things like monthly bills, your daily travel, grocery shopping, medicines and anything that you have thought of buying in the future, all of these factors need smart budgeting and saving strategies.
Budgeting for short-term goals
The first question that comes to everyone’s mind is how much is short-term? Is it 15 days or anything between 1-3 months? That’s the first thing you need to sort out when you talk about short-term and long-term budgeting. Short-term and long-term goals go hand-in-hand and the inability to budget on your short-term goals might lead to a failure in achieving your long-term goals. What are those short-term goals then? We are talking about things that you know you have to pay for every month, bills that you know you would have to pay for in two months from now or any vacation that you have planned immediately.
How to budget for short-term goals?
The best way to start budgeting is to measure your in-flow and out-flow and then take it from there. Take a look at your salary or your household income and the total expenditure per month. Also, it is important to take a look at your expenditure on necessities and leisure activities. This is what budgeting is about, you need to prioritize and then decide on where you need to spend and where you could afford spending. It is quite important that you spend on your short-term goals and yet are able to invest for your future. If you are able to spend, save and invest at the same time, it’s quite ideal.
Budgeting for long-term goals
Similar to defining what short-term goals can mean, your definition for long-term goals must also be clear. It could be anything from six months to a year or two. Not only do you have to be meticulous about how you go about budgeting for the long-term goals, you also have to be careful and practical. It could mean anything from planning to buy a car or a house or saving for your child’s education. It could also mean that you are saving for your retirement. As said above, the failure to not budget for short-term could lead to failure in achieving long-term. It is as simple as that.
How to budget for long-term goals?
Like for short-term budgeting, you need to have a clear idea and information of your income and expenditure. It’s always good to have a savings account and it’s ideal that you start saving some amount of your salary from the get-go. If you haven’t started doing so, start doing it from today. If you want to buy a house or a car, keep an eye on different types of bank loans, their interest rates as well as the down payment that you may have to pay. If it’s a long vacation that you want to plan with your family, take a look at all the end-to-end costing factors before setting out a cost target.
While budgeting for long-term, the time it will take to reach a certain target of amount must be plotted. Make a list of what you want to buy or achieve and set aside an amount every month so that you know when you would get to a certain long-term target. Take a look at savings and investment options and go for it.
Things to do while budgeting
It is very important that you keep the above steps in mind. We have seen people writing to us out of an urge to help them in budgeting because of the lack of clarity in their mind. Budgeting is an easy step that people tend to complicate by not doing it consistently. At Chango, we believe that you are the master of your goals and budgeting is the first and the easiest step that can help you get to your goals, be it short-term or long-term.
If you need any budgeting help, write to us and to stay on top of your personal finance game, sign-up today. Happy Finance!