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IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

 

What Is Budgeting and How Does It Help in Investment Planning?
 

Many of you might find it difficult to resist the temptation to overspend money and save for the future. But planning for future goals and retirement must be your priority while earning. This is where budgeting comes into the picture. It is an essential strategy to bring discipline in spending and achieve financial goals. From the government to businesses and households, budgeting helps all to remain financially strong. So, find out what budgeting is and how it helps in investment planning.
 

What is Budgeting, and Why is it Important in Investment Planning?
 

Many individuals consider budgeting a difficult and tedious task that requires specific skills. But it is a simple process that can help you achieve your dreams on time.
 

The process of managing your income and expenses weekly or monthly is known as budgeting. It is a personal finance plan that allows you to allocate resources to different expenses such as utilities, clothing, healthcare, savings, investment options, insurance, etc.
 

Budgeting helps determine the amount of money you can save for financial goals and is the first step to making your dreams a reality. It involves investment strategies to multiply wealth, achieve financial targets and plan for retirement. Moreover, budgeting can help avoid debts or pay them off if you have any.
 

Following are the reasons why budgeting is important in investment planning and the reasons you should start budgeting today:


  • Helps you spend money wisely


    Budgeting is a perfect tool if you spend your money on unnecessary items. It is because budgeting makes you aware of how much money you are spending and where you are spending it. Not only this, a good budget helps you save for unfortunate times and fulfil your responsibilities without the need to opt for debt.


  • Provides control over your money


    Budgeting gives you control over your money by providing a clear picture of savings and spending. It allows you to track your expenses and savings while allocating your income to different buckets according to priorities. Also, by having strong control over money, you can do investment planning in a better way.


  • Allows you to achieve financial goals on time


    A good budgeting strategy makes saving easy, which you may find difficult in the absence of a proper track of your income and expenses. By saving money regularly, you can achieve your financial goals, such as buying your dream house, buying a car or planning for retirement.


Personal Budgeting Tips



Creating a well-defined personal financial budget allows you to accomplish your dreams smoothly. So, if you find it hard to manage your income and expenses and tend to overspend, here are the tips for budgeting:


  • Decide what to use while making a budget


    The first thing to consider while starting with a budget is determining where to prepare it. You can either use a spreadsheet or a diary to create your budget. Ensure you have easy access to your budget so that you can make necessary changes to it when needed.


  • Calculate your total monthly income


    To make an effective budget, you must calculate your total monthly income, which may include your spouse’s income, rental income or other. A clear picture of your total income allows you to spend and save accordingly.


  • Collect all financial documents


    While making a budget, you must collect all your financial documents, such as bills, bank statements, fee slips, etc., to gain clarity on your expenses. With this, you can gather all expense details in one place and create your budget easily.


  • Enlist your monthly expenses and divide them into fixed and variable


    Once you evaluate your monthly income, you must now enlist your monthly expenses. You can start with the larger expenses like loan repayments, rent and others and then include other expenses like clothing, entertainment, utility bills, etc. Further, divide your expenses into fixed and variable. Fixed expenses remain the same each month and may include money investment plans, loan payments, rent, utility bills, etc. But variable expenses might change each month, such as entertainment, clothing, health, etc.


  • Eliminate irrelevant expenses if needed


    Budgeting not only involves chalking out income and expenses but also managing them. So, you should evaluate your variable expenses and eliminate the irrelevant ones. This would allow you to save more money or keep it aside for an investment plan.
     

Budget and Investment Planning
 

A budget involves not only savings but also a strategic investment plan that makes your money grow with time. So, investment planning is an essential part of budgeting that includes evaluating your financial goals and risk appetite. Based on your goals and risk tolerance, you can opt for the best investment plan in India for the middle class, such as fixed deposits, mutual funds, ULIP plan, Sovereign Gold Bond scheme, etc. But while choosing money investment plans, you must learn about the investment options available to make an informed decision.

Conclusion
 

Managing your income without a budget can make it difficult to achieve your goals. But preparing a realistic budget allows you to forecast your spending and aid you in long-term financial planning. It inculcates discipline and acts as a saviour when income fluctuates or is lost. Moreover, a budget helps identify irrelevant or wasteful expenses that you can eliminate to increase savings or investments. 

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Frequently Asked Questions

What are the important components of a budget?

The important components of a budget are the day-to-day expenses, net income, fixed expenses, variable expenses, and other liabilities.

How can I invest with a low budget?

With a low budget, you first need to assess your risk profile. Once that is done, you can look into investment options like government bonds, mutual funds, insurance plans, and fixed deposits.

Disclaimer

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not guaranteed issuance plans, and they will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and does not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.
  • Past performance is not indicative of future performance.
  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.
  • Please make your own independent decision after consulting your financial or other professional advisor.