Booklet - SEBI Investor Awareness Website

A Personal Budget is simple to prepare.
Income. Add up your monthly income: salary and investment income.
Expenses. Add up monthly expenses: rent, loan payments, average food bills, medical
expenses, entertainment and so on. Determine an average for expenses that vary each month,
such as clothing, or that don’t occur every month, such as car insurance. You will need to track
how you spend cash for a month or two. Most of us are surprised to find out where and how
much cash “disappears” each month.
Subtract expenses from income. What if you have more expenses than you have income
Not an uncommon problem. You have three choices: cut expenses, increase income, or both.
Cut expenses. There are ways to reduce expenses, from reducing grocery consumption to
shopping for low-cost items without compromising quality. Compare monthly variances
between actual expenditure and budgeted expenditure
Increase income. Improve your job skills or education to get a better paying job, or make
money from a hobby. It is hard to apply a rule of thumb toward savings, because it varies with
age and income level. Ten percent is a good start. If you find that is too high for you, don’t let
that deter you. You can start by putting a little aside each month and then slowly increasing
it.
Activity
Prepare a monthly budget by specifying your income in terms of all inflows of cash from
whatever sources, after which you need to deduct all possible expenses you think will arise
during the month. It is important to do this exercise before the start of the month so that you
can anticipate what can be the likely level of investments. Rule of thumb ideally says that you
need to save 20% of your income. Complete this exercise to see whether you really are!
A: Income
Salary
Rent
Interest per month
Capital gains
Business
Other sources
TOTAL INCOME
B: Expenses
Travel and transport
Food and utilities
Rent
Leisure
Insurance premium
Children’s education
Holidays
Other
TOTAL EXPENSES
C: Savings = income − expenditure
Your monthly budget
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