Deciding a budget strategy for 2021
Financial planning and strategy is the most discussed topic since the start of Covid-19. People worldwide were highly concerned about how they would go about maintaining financial stability. With the uncertainty looming even this year, many started looking for a budget strategy in 2021.
As compared to the years before the pandemic, it is essential to create a strong budget strategy for 2021.
Although this might seem to be a daunting task, you would have to go about it in a strategic way. In the following, we have listed some areas that would need to be considered when planning your budget.
How to plan my budget strategy for 2021?
When creating a budget strategy, you should consider all aspects that would require to be taken care of. Some important aspects include the following:
- When planning for a budget, we often forget to consider outside costs such as food, entertainment, and basic wants. In metropolitan cities, these could be very expensive as compared to other places. Leisure is part of everyone’s life and it allows us to escape our mundane schedules. So you could either start saving on these by either setting a budget for eating out and not exceeding it, looking out for cheaper places or those that offer discounts, or create an independent account for only this type of expense.
Look for return on investments (ROI)
- Investment avenues are available and it is recommended to invest only what you can afford to lose. Moreover, whether you are investing yourself or through a broker, you should check the ROI. Ensure to go for stocks that you have research and that are performing well and not the ones plainly recommended by your peers.
- Look for how much you would receive from that investment within a year or five years and consider the market value before you invest your hard-earned money in it.
- When creating a budget strategy for 2021 and the future years, you would have to factor in your emergency fund. The pandemic, especially, has highlighted the need to have an emergency fund that is at least equivalent to your salary for 6 months. However, if you are the sole earner of your family, this number will automatically increase.
- Therefore, the earlier you start, the better it would be. Look to invest in fixed deposits or SIPs that would allow you to withdraw money instantly in the case of an emergency.
Prioritize your spendings
- Let’s say you have to look for a smaller house due to sudden job cuts as you feel unable to make rent on your current house. So, spending on unnecessary wants such as the new set of headphones that just hit the market could wait till you become stable enough for making rent.
- You would have to start prioritizing your spendings not just in times of difficulty but at all times. After all, impulsive buying like Joey Tribbiani did from I Love Lucite will only buy you temporary happiness and put an unnecessary dent in your finances.
- The most important aspect is to plan your finances strategically as, without this, the above pointers would be headed for failure. Try to make planning a part of your lifestyle; although nobody can assure that everything will go according to the plan, at least by doing so you would be able to manage the shortcomings efficiently.
What should I do if my budget strategy for 2021 is still falling short?
If you feel that your budget is still falling short as compared to your needs, you need not worry much. You can start from the ground up and create a priority list so that you can allocate your budget accordingly.
You would also have to look for another income avenue as the income from your regular 9 to 5 may not suffice. Do your research well and look for reliable avenues to earn a side income from.
Planning a budget need not be difficult but it surely could be time-consuming. Do not rush with any decisions and always ensure to do your research well.
Frequently asked questions
1. How can I create a budget for 2021?
- Be realistic, switch up your current methods, and start identifying essential expenses. You could also consider employing saving methods such as the 50/30/20 method.
2. What is a realistic budget plan?
- A realistic budget involves determining your monthly income and then calculating all of your monthly expenses. When determining your income, use the amount you bring home after taxes and deductions.
3. How do you create a budget that actually works?
- Simply, figure out what you are currently spending on. One of the main reasons many budgets fail is that they don't line up with reality.
4. How do you create a good budget?
- Note your net income. The first step in creating a budget is to identify the amount of money you have coming in and adjusting your financial habits accordingly.
5. What is the 50/30/20 budget rule?
- This budget rule states that you should spend up to 50% of your income on needs and obligations. Around 30% on your wants and the remaining 20% should be tucked away as your savings.