Jul 2022
3 mins read

5 Tips For Household Budgeting – A Quick Look

Household budgeting involves a substantial personal finance planning process. Through planning, one can live a comfortable lifestyle, ensure savings and investments, and wealth creation - in other words, enjoy financial planning benefits. Here are some tips to show you how to deal with unexpected expenses, manage daily expenses, and ensure savings.

Don’t Spend Your Entire Paycheck on Expenses

Your entire monthly paycheck should not be spent on household expenses alone. Since the needs for each month may vary, have a monthly budget allocated for your financial planning needs, to manage monthly expenses better. A great tip to manage income and expenses is by listing down all your monthly expenses, such as rent, grocery and food items, EMIs, subscriptions and the like. Next, check your payment schedule and keep a tab on quarterly/half-yearly expenses such as insurance premiums, subscription renewals, like OTT, apps, software, and others. This exercise will help you allocate funds and have a bird’s eye view on your expenses. 
point 1

Methods to Manage Household Expenses

People use a variety of methods to manage expenses, such as the 70/30, 60/40, or 50/50 rule. For instance, the 70/30 rule means you use 70% of your monthly income and save 30%. Decide on what’s comfortable for you. Let’s assume you decide that 70% of your income should go into monthly household expenses. 

Next would be to manage the household expenses. Breaking down expenses into categories is one good tip to have greater visibility on expenses and therefore ability to manage better. If you are wondering how to manage grocery expenses, breaking down the requirements into the following categories can help -

  1. Grain and grocery items

  2. Milk, eggs, meat, fish, etc.

  3. Medicines that need to be taken on a regular basis

  4. Fresh fruits

  5. Processed foods like biscuits, bakery goods, snack items, etc.

Once you have this segmentation, you will know exactly how to manage and control your expenses and save more. Try to ensure that your monthly expenses do not go beyond that 70% figure.

Of the remaining 30%, look at a 40/60 split - 40% goes into savings and 60% into investments. For example, if ₹10,000 is the savings amount every month, ₹4,000 can be put into savings and ₹6,000 into investments.

point 2

Easy Liquidation At Your Fingertips

Putting your savings in easily accessible liquid instruments (Savings Bank/ post office savings accounts, Recurring Deposit) is ideal. This allows you to be less stressed on how to deal with unexpected expenses, such as having to manage medical expenses.
point 3

Long Term Investments

If your investments are more long-term, then consider the following factors prior to investing:

  1. Define your risk appetite – high, moderate, or low.

  2. Define your investment goal and the time horizon; for instance, you may seek to build an investment corpus value of ₹50 lakh in 20 years.

  3. Either use a financial advisor you trust or do your own research to find out financial instruments that will allow you to reach your investment goal. These include mutual funds, systematic investment plans (SIPs), stocks and shares, exchange-traded funds (ETFs), bonds, international funds, and many more.
point 4

Review Your Portfolio

Review your investment portfolio periodically, at least once a year, to adjust your portfolio holdings, always keeping your final investment goal in mind. Try not to be swayed by sudden market fluctuations, especially if you have invested in good stocks or equity mutual funds. The market tends to make up losses over longer time periods. Further, try not to be overly influenced by market fads. If you are interested in something new, never invest before you have done the due diligence.
point 5
This checklist can be a starting point on how to manage home expenses in India and bring discipline to the household budget. In addition, get in touch with a professional financial advisor to ensure regular and consistent return on your investments.
PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 266 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
The information contained herein is provided by PGIM India Asset Management Private Limited (the AMC) on the basis of publicly available information, internally developed data and other third-party sources believed to be reliable. However, the AMC cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance* (or such earlier date as referenced herein) and is subject to change without notice. The AMC has no obligation to update any or all of such information; nor does the AMC make any express or implied warranties or representations as to its completeness or accuracy. There can be no assurance that any forecast made herein will be actually realized. These materials do not take into account individual investor's objectives, needs or circumstances or the suitability of any securities, financial instruments or investment strategies described herein for particular investor. Hence, each investor is advised to consult his or her own professional investment / tax advisor / consultant for advice in this regard. The information contained herein is provided on the basis of and subject to the explanations, caveats and warnings set out elsewhere herein. The views of the Fund Manager should not be construed as an advice and investors must make their own investment decisions regarding investment/ disinvestment in securities market and/or suitability of the fund based on their specific investment objectives and financial positions and using such independent advisors as they believe necessary.