Case 1: A Millennial
Kapil Sharma is a software engineer who works in a mid-sized Android App development company. He hails from Bihar but is currently living in Mohali, where he was for his engineering degree and then got a job. He got a credit card in the second month of his job, as the salary during the probation was not meeting his expenses.
A little over a month ago he was living in a college hostel, eating mess food, and was using the same pair of jeans for days. Now he needs a power bike to reach the office, branded office wear, a high-end smartphone, and money to eat out with colleagues. Within a few months of his placement, Kapil is now facing a crunch, so much so that he had to ask for money from his mother to pay off the credit card debt.
Case 2: A Well Settled Couple
In a different scenario, Shivani and Rohitash, a middle-aged couple find themselves in a bind. Both professionally educated and working with decent incomes. As the date for their daughter’s college admission approaches, they are finding it hard to arrange her tuition, lodging, boarding, and other expenses.
Right now, their combined take-home salary is close to 2 lakhs/month. They are paying a 45K home loan EMI, two 20K EMIs on their cars, a 15K EMI for their Europe tour when restrictions were eased earlier in 2021. In addition to their home expenses, they are paying for the schooling, coaching, and transport of their daughter and younger son. As they often work late most dinners, and sometimes lunches, are ordered on Zomato or Swiggy. At the end of the month, they find it hard to keep enough in their bank accounts for their SIPs of Rs. 10K as well as quarterly insurance premiums. (Read: What is SIP in Mutual Funds?)
So, What’s the Problem?
Whether it is millennials, young professionals, middle-aged couples, or retired seniors – many people find themselves in a bind every now and then. They feel that suddenly, they do not have sufficient funds to meet all their needs, let alone desires.
People think that they manage their finances well – but it is the unexpected and out-of-the-blue expenses that put a spanner in their works. The easy availability of credit makes spending beyond their incomes to splurge that much more simple! (Also Read: Sticking to your Budget can make credit cards a boon)
Do you too find yourself in a similar situation very frequently? Do you also feel that it is inflation that is eating away at all your earnings? Do you find it hard to believe that your bank account is empty even before you enter the last week of the month? Can you relate to Kapil’s or Shivani & Rohitash’s story? (Read: What is Inflation and how does it impact your Financial Plan?)
If your answer is a yes to any of these questions, then you need to see a doctor immediately! A doctor of personal finances that is. The problems that you are facing are real and need practical solutions.
If you look closely, then the problem is there is no planning in spending or buying a big-ticket item. The human brain cannot always keep all the information and that is why writing them down on paper helps. When you plan ahead your expenses, based on your expected income, you are essentially making a budget. (Also Read: Why Budgeting exercise is important?)
But is it possible to stick to the budget? Budgeting is so boring and tiresome, is there any other way?
Yes and No.
Just like quitting a bad habit (smoking) or adopting a good one (daily morning workout) you need to push yourselves a little every time there is an urge to do things impulsively. Executing any plan is just putting one step after the other and continuing doing it. (Read: 6 habits of financially planned people)
Like Lao Tzu said that the journey of a thousand miles begins with one step, you also need to take that. And to sort your financial mess, a budget must be it.
Challenges of Budgeting
Saving and investing an adequate sum before spending and following the budget while spending can help a lot to rein in temptations. But the problem is that we have never been taught how to manage money – at least most of us.
Budgets are Yeti
The challenge that many people face today is that they do not know how to make a budget and so do not know how to get out of the trouble. While we were young, our parents did all the spending without telling us why they do it.
Even if we were denied anything, their cryptic answer would be, “budget me nahi hai (it is out of budget),” without ever explaining to us what a budget is. The budget became one of the mythical creatures like yeti or werewolves, to which you can ascribe any bad decision.
As discussed in our previous article on “How to Avoid Overspending and Shop Safely?” shopping app notifications are one of the most common tactics to attract more consumers. Once a user installs an app, the app publisher has a direct and almost free channel to engage with them.
Discounts and deals are promoted by sending customized notifications to the consumer, based on their past interactions. It means that marketers know how to tempt you! With one action you can reduce their control over your life and actions – disable all notifications from all shopping apps.
As an extreme step to reclaiming your agency over money, uninstall the apps altogether. This will make it a little less convenient for you to do impulsive shopping. And remember, the less convenient it is for you to spend, the less likely you will spend.
Budgeting Mobile Apps to Help
Some good budgeting can help you in tracking your expenses and then help you make a budget. The most popular of these two apps are- YNAB (you need a budget) and Mint (not to be confused with Live Mint publication). In a more Indian context Walnut and Money Manager.
These apps can help you with:
- Monitoring your cashflows
- Manage credit cards and loans
- Track your bank accounts
- Categorize your spends
- Offer visual charting and analysis
- Settle account with friends and split bills
Most importantly, once they analyze your spending, they can help you make a practical and achievable budget. You can set alarms for reaching certain spending milestones (say 70% of your entertainment budget for the month) and notifications for upcoming expenses and bills.
In a way, these apps behave just like shopping apps, but in a positive direction towards your financial success and wellbeing.
However, by using such apps you will put your financial secrets in their safekeeping, so ensure if it is really safe to do so.
- Go for a reliable brand that is reviewed by reputed tech editors.
- Go for an app with a subscription feature, so that you have ad-free access – when you are not paying, you are the product.
- Understand the security, privacy, and data safety policies carefully.
- Enable two-factor authentication and route all your payments through them. Leaving a backdoor will again ruin your financial plan.
A Word of Advice
A plan is as good as its execution and the world’s best-laid plans have been marred by poor execution. The added challenge is that budgeting, planning, and controlling yourself from spending is going to be against your instincts. It is human to falter and take a misstep. But what is more human, is to realize the mistake, admit it, find its reasons, and try not repeating it.
We have seen many clients benefit from writing a journal entry – in their personal diaries or the notes app on the phone. You just need to explain to your future self why buying something or spending now is going to be helpful to them (your future self). Try to be concise and rational rather than rationalizing.
More than your budgeting app, these “note-to-future-self” will help you put things in perspective and realize the mistakes. And there is no one who can make you understand better than yourself.