Money tip! How to manage your budget when expenses are high, income low

If your expenses are exceeding your income and you have problems managing your budget, on Zee Business Money Guru show, expert Kalpesh Ashar tells you the nuances of financial planning. Financial planning is a method to manage your budget. Financial planning is important to meet your financial and other goals. It also helps you meet any unforeseen or emergency needs. Importantly, you should plan today to ensure that you lead a carefree life in the future. Even if you have a limited income, you can still effectively manage your budget by balancing your needs and wants.

The thumb rule effective financial planning is to set your financial goals. How can you do that?  Setting your financial goals is not rocket science and you can do that by planning your finances. The rule to follow is 50-30-20 rule.

Your budget can be divided into three layers. The first layer is 50% where you have to identify your needs and spend the money according to that. The 50% category will include expenses for groceries, utility bills, conveyance, education of children, EMIs and your healthcare needs.

The next layer is the 30% one. Under this category, you have to decide where would you like to spend the money on. It can be on leisure or entertainment activities, expenses for your parlor/salon visit, shopping, hobby activities and visiting restaurants once in a while.

The third layer is 20% which is equally important than the other two if not more important. But this is the area where we more often than not fall short of the commitment. We have to use the 20% share of your income on savings, retirement planning, and emergency fund.

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The most important way to manage the 50-30-20 rule is to identify the sources of your cashflow. This is the foundation of any financial planning. Also, make a list of all expected and potential expenses. This will help you understand your expenditures as against the income.