6 Budgeting Tips to Pay Your Diwali Personal Loan EMIs on Time

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Introduction

Congratulations on Availing a Diwali Personal Loan from Loan Singh!
If you are the recipient of this email from our highly efficient operations team, then you deserve a pat on the back. With most millennials struggling to manage their finances, it is not advisable to apply for any sort of credit. We receive hundreds of applications daily; with a majority of those applications getting rejected. The reasons are aplenty. Some have a poor credit score thanks to past defaults with lenders. Some barely have any money left to spend for yourself; EMIs are a far-off thing. Remember that availing a personal loan is a serious responsibility.  The Diwali personal loan you availed is for the purpose of celebration. You wouldn’t want to avail a loan and then keep worrying about how you can pay off the EMIs. That would make Diwali a bittersweet experience. For those who have their applications rejected, fret not! We are putting this piece up for you as a reference point to understand why budgeting is important to enjoy a financially stress-free life.

 

Budgeting, in your life!

Budgeting allows you to set-up a spending plan, which in turn ensures that you always have the money to spend on important things. Budgeting allows you to stay out of debt if you maintain discipline towards it. Budgeting does not mean you become a miser and try to save every single penny. A good and well-structured budget provides you with a great opportunity to experience a comfortable lifestyle with reduced financial stress.

You obviously cannot increase your monthly salary at will. It comes with hard work and patience. So, in case your monthly income is the same for a certain period, you will need to limit your expenses to be able to save more. Add to that life’s challenges such as marriage, maintenance or purchase of a second-hand vehicle, family get-togethers, medical emergencies, etc. Rise in prices due to inflation doesn’t help either. Whether you’re a low-income salaried individual or take home a fat paycheck, you still need to follow a budget. Fixed incomes and ambitious financial goals make a budget most essential.

Having a budget also does not mean that you don’t have to apply for a loan. A personal loan is a good option when you need quick funds, and that too, without any hassles or time delay. Let’s say that if you are the only working member in your family, it would be hard for you to improve your home without a personal loan. A loan will be accompanied by EMIs that need to be paid each month. This EMI will show on the expense side of your budget.

Simply, making a list of expenses versus income, and jotting down numbers under each column daily won’t give you financial freedom. You have to analyze and implement the budget in your financial decisions. A budget will indicate warnings when you move away from the financial plan. Not having a well-set budget will either leave you without a plan or without benchmarks to compare to previous month’s savings.

 

Making use of your budget

Budgeting is a process of creating a plan to spend your hard-earned money. A plan, that you so painstakingly create, should contain fields such as income, expense, bills, EMI, and investments. Budgeting helps you determine, in advance, whether you will have enough money to do the things you need or would like to do. It balances your expenses and income. If the expense side is dominant then that indicates debt.

Consider a scenario where you are earning well but are unable to save due to your spending habits. You have no clue where your salary is used-up and hence are forced to borrow cash from friends, or family, to pay for bills and EMIs. When you are on the brink of such financial mess, it’s time to get a hold of the situation and start creating a budget. Millennials nowadays don’t include ‘budget’ in their vocabulary. Living month on month, they consider budgeting to be a control mechanism rather than a byword for financial leeway. This is certainly not true. A budget simply helps you to spend smartly. It helps you to focus on your hard-earned money. It prevents you to overspend on less important things. It channelizes your resources to areas that are higher on your priority list. With India, firmly enveloped in digitalization, you have the ease and liberty of spending via credit card, as well. Preparing a budget requires you to visualize not only the past spending behavior but also look at your current status. Your budget then helps you to achieve a stable and stress-free financial future. Let’s take a look at ways by which you can make a better use of your budget.

Financial goal

A budget helps you to get an overall picture of your finances. The goal is to collect all possible information pertaining to bank statements (slips, receipts), credit card information (payment statements) and salary slips. Then find the average amount you spend monthly, and break this down into segments, such as fuel, gas, entertainment, household expenses, insurance, debts paid, medical expenses and end-savings per month.

Try to balance the income with the expense. This will show if you are in surplus (more income less expense), or in deficit. Setting timelines for your goals is also a good practice. For example, you can start a small fund to save for traveling abroad and keep a target of 6 months to do so. You can then judge how much you need to allocate every month towards the fund.

Habits

Overuse of credit cards can lead to serious repercussions on your budget. Sticking to your budget also involves spending via credit card at a minimum and only when necessary. It seems much more fun to go on a shopping spree over Amazon’s Diwali Sale rather than to save now for a dream holiday, same time next year. Sure, the offer is now and it has to be availed-of but do you really need to make that expense? Do you really need a cable connection plan that includes 60-70 channels or 25-30 pair of heels? Good budgeting is important to help you re-think your spending habits and focus on your financial goals.

Peace

A good view of your financials will help you stay focused on wealth building. You need to save to have a grand wedding for your children or be secure during your retirement. Budget is important to eliminate debts, which once done will help you to redirect that money towards your savings.

If you don’t have a budget in place, you will not be able to afford a new flat screen TV, a swanky new car or jewelry for your spouse. Budgeting is mostly avoided by a salaried individual due to work or other priorities. It is a great way to save you the grief of overspending and falling into debt. It does not stop you from enjoying your life, rather ensures that you enjoy your life in a planned way.

Track

Budgeting helps you keep track of your expenses from personal loan EMIs, credit card bill statements, ATM receipts, rent receipts, monthly utility bills, monthly shopping bill, restaurant bill, dividend receipts, insurance policies, etc. The usual rule to follow towards budgeting is the 50-30-20 rule. According to this rule, 50% of your income should be used to spend towards essentials such as food, clothing, rent, fuel, cable, etc. 30% of your income to be spent on discretionary things such as dining out, online shopping, festival shopping, etc. The balance 20% is to be saved.

Emergency

Emergencies can crop-up any time. It could be a job layoff, illness, accident, death in the family, bad divorce, bad investment decisions, etc. A well-structured budget can help you have the savings needed to prepare for an emergency. If it is possible, try preparing an emergency fund out of the budget. This spare money can also help you get out of a financial debt, should the need arise. Align the emergency fund to your budget and start with small savings.

Credit

You can shirk any credit-related worry if you adhere to your budget. Payments of your personal loan EMIs and credit card bills will be a breeze because a budget will ensure you have money in the bank. You can use your budget to clear-off a personal loan ahead of tenure. Following a strict budget over a period of time will build a pattern that will tell you how sooner you will be clearing your loan and that will give you a chance to plan what you will do with the money you otherwise would have spent on an EMI. The budget helps you set-up short-term and long-term goals such as planning a vacation, purchase a second-hand car, or plan for your child’s education.

 

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