The Government’s budget gets prominent coverage in February end every year. The Government’s budget every year is an account of government’s income and expenses of the past one year while formulating the income and expenses policy for the next financial year.
But while these government’s policies has far reaching ramifications for the nation at large, let us discuss how to create our personal budgets as an investor.
The beginning of the new financial year is the right time to bring a focus on our personal budgets.
Here are the key takeaways from the Union Budget 2016 which will have an impact on your personal budget as an investor or tax payer.
While the above provisions in the Union Budget do impact the consumers, these things are not really under our circle of influence. In other words, they are beyond our control and will keep on changing from time to time.
Taxes are a reality that we have to live with. We have to look at the tax provisions that apply to us and then move on to optimize your tax outgo.
A consumer would be much better off if she would focus on investing in herself so that their income grows and helps them lead a quality life.
Let me add another interesting aspect of the Government’s budget. The Government can spend more than they earn! (They have a jargon for that, it’s called fiscal deficit) Maybe that’s one reason why personal budgets (where we have to live within our means and not resort to wishful planning) are not so glamorous/ exciting!!
Now it’s worthwhile to ask ourselves this question:
What’s our personal budget for the next 12 months?
Anyway, taking a cue from the union budget presented every year, our own personal budget would be able to answer the following four important questions:
- How will I increase my income in the next 12 months?
- How will I prioritize my expenses in the next 12 months?
- How will I maximize my investment portfolio in the next 12 months?
- How will I minimize risks by way of life/health insurance?
One of the first suggestions for answering question no.1 is by investing in ourselves.
- Investing in skills that help me with my career,
- Investing in skills/knowledge that help me with optimizing my expenses,
- Investing in skills/knowledge that help me with investments and risk coverage.
One important way of getting started in your investing journey is by “Paying Yourself First”. Pay yourself first is a foundation principle of money management where you take out money to invest from your income before spending on anything else.
It is worthwhile to prioritize your expenses so you know that your money is being put to proper use. Your personal budget helps you think over your expenses and thereby prioritize them.
The budget process will also help you think about how to maximize the value of your money. While we keep working for money, it makes sense that money also works for you.
The investment process is about looking at three important areas that are returns, liquidity and safety. We have to evaluate the investment options on the matrix of returns, liquidity and safety before we decide on which instrument to invest in.
And while we explore the investment options, covering the financial risks of life is equally important. Your personal budgeting exercise must also include getting adequate insurance for your financial goals of life.
Conclusions : To conclude, while it is important to be aware of the impact of the Government’s annual budget on us, it will make much more meaningful if we create our own personal budgets. If more and more of us create our personal budgets, we will be indirectly contributing to the nation building activity. After all, the nation is the aggregate of us individuals only.
Let us be an aware and responsible consumer and investor and be a proud Indian!