Spending Strategy!

We all need a spending strategy! A solid spending strategy is the best thing you can do to put your finances in order. 

Where does the money go every month? This is the first question we hear from users when they realise that they need to start saving. Each life stage brings its own set of expenses with it and most people just struggle to keep up.

A spending strategy also called budget helps when managing savings, income, and expenses. To get some tips on a budget you can stick to, we reached out to Priyank from Bargad investment services.

Q. Why is a budget important?

I actually prefer the term “spending strategy”. That's because everybody gets to chose what they most want to spend on; how much, and when. It's important because it will mirror your personal priorities when faced with a spending decision.

 

Q: What tips do you have for sticking to a budget?

This usually includes two tasks, namely knowing yourself (versus fooling yourself) and having an open conversation if you share spending decisions with another person (spouse, kids, etc.). Try not to beat yourself up if you fail to stick to your budget first few times. Keep trying until it sticks. If it never seems to stick, there's a good chance your budget doesn't really reflect you and may, in fact, reflect only what you think it "should" reflect. Until it really reflects your personal priorities, it will be a very uphill battle. When spending plans reflect our personal priorities, it can still be a mind shift, but it is generally a positive one that we have actively chosen, so there are some excitement and momentum in the change.

Q: When planning a budget, what are some things to keep in mind?

Think about it as a holy grail as in something that will not be defied. It's the same when it comes to spending. No matter how you slice it, it's always a juggling of increasing income or reducing expenses. Just like weight loss, we can talk about it in a thousand ways, but in the end, we are either exercising more or eating less or some combination of both. It's the same with spending. We can add drama, pray, blame parents, blame friends, inflation etc., but it always comes back to earning more or spending less or some combination of both.

Q: Are financial goals important when planning a budget?

Yes. I can say a financial goal is to go to Bangkok next year, but at the moment, my spending leaves no amount to save for this goal. My chances of reaching my stated goal are slim. By contrast, if I have this same goal and determine that I would like to trade my eating out and drinking costs to save for this goal, I am in control of that decision and have a high likelihood of reaching it. Goals help direct your thinking (consciously or unconsciously) and actions.

Q: What is something most people forget about when planning a budget?

Give yourself permission to spend on the things you care about most. When we work with people on their spending, we do not judge the spending. We do ask them to articulate their goals. What do you want? When do you want it? How much are you willing to spend on this goal? And then we compare that to where they are spending today. They get to choose to continue spending on other things or rearrange their spending to reach their stated goals. People also forget that whatever you care most about spending is valid for you. Try not to be swayed by constant marketing to make you think you should want one thing or another. Focus on your situation.

However since our launch earlier this year we have received several requests from our users for advice on a customised spending strategy based on their personal situation. Based on popular demand we launched a customised basic financial plan at INR 80. This is primarily a budgeting plan. It provides recommendations on how to improve your finances based on your current income, the city of residence, number of dependents etc.

Note: This post is a nonedited version of my interview that was posted in a personal finance magazine. 

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