Budget for your tomorrow fund

Nevertheless, the reality is that there is a tomorrow and that tomorrow can stretch for decades more than you have accounted for. And you will need to have enough financially, to fund this tomorrow. Is there a way for you to live in the moment and fund your tomorrow?

Yes, absolutely. It called budgeting, but we can simply call it your tomorrow fund.

Are you struggling with your savings or in other words, have none? Are you living each month watching all your last Rupee being spent or in other words, hand to mouth? Maybe, you are stuck in a vicious spending cycle, habits which are hard to let go and no awareness on how to change this pattern. The good news is that you can change the pattern, your desire to live in the moment should not over shadow your tomorrow fund.

The second good news is that living in moment doesn’t necessarily mean spending all your money. To transform your spending habit, you will have to cultivate new ones. Let’s begin by understanding how to build a tomorrow fund.

In order to prioritise saving, you may have to alter your basic money habits. Number one is that you begin your monthly savings, even before you spend. To do this, ear mark a proportion of your monthly income that you would like to put aside as savings and simply, shift it out of your bank first thing at the start of your month.

You may directly invest this amount for which ever purpose you would like: wealth creation or to cater to emergencies. The former will help you build your tomorrow fund, while the latter will stop you from dipping into your tomorrow fund should a financial emergency occur today. 

What if you simply do not have savings?

If your issue is around how to save, then following a suitable budgeting technique can save you. There are several ways to budget and the common ones are easy enough to follow.

50/30/20 rule: This first technique is one of the most popular and easiest to follow. Here’s what you should do – spend 50% of your monthly income on your needs like house rent, groceries, utilities, clothes, personal care essentials so on, the next 30% you keep for your wants like entertainment, hobbies and so on and the last 20% you save. Only you must save that 20% before you spend on anything else.

What if your needs are so much that 50% is not enough? Then you must reduce your wants and shift some of that money towards your needs till the time you are able to increase your income. Barring an emergency, do not touch the 20% earmarked for savings.

Also apply this rule to any income you get be it salary or rentals or commissions. For windfall gains like bonus or inheritance, try to reverse it and save at least 50%.

Envelope Budgeting: This is a slightly dated way to do budgeting, but very effective for those who cannot resist spending. In this technique, your prep involves tracking expenses on a daily basis for at least a month so you understand what and how much you are spending, accurately. This can be done with the help of a spending tracker app or even a simple excel sheet. Once done and you are sure about your spends, start keeping aside money in an envelope as per the expense you have tracked. You only need to keep money for needs and some wants. Once the money has been kept aside, you do not spend anything additional on that item. Say you spend Rs 1,000 on fruits in a month, that’s a hard limit, you cannot buy mangoes off season and spend a bunch more just because you have a craving. Lastly, empty out your bank account of all the excess money, beyond what’s in the envelopes, and invest it immediately. Not only will your savings go up, your expenses will fall too.

How does one follow this in times of digital and online payments? Try a neo bank which will help you segregate or a mobile app that sends out warnings as you reach your spending limits on specific items.

Zero Budgeting: Here you start from scratch. It doesn’t matter what you have been doing so far, but you decide how you want to proceed henceforth. You may also use this zero-budget technique only for some expenditures. Let’s say you realise that you are spending too much on buying athleisure wear and you don’t really need that. You can simply stop spending on that or keep aside a fixed amount in an envelope for that expenditure. If you are spending too much on weekend binging, once again choose a figure, an amount you are comfortable spending and make that a hard stop. Don’t go beyond it. Here you needn’t track in advance what you were spending, just decide a limit beyond which you will not spend on a particular activity.

Pick any one of these three techniques and get started with a budget that feeds your tomorrow fund. Don’t forget, step one is understanding that living in the moment, need not happen at the cost of your tomorrow.