Budget 2021: Expectations, Glossary & All that we can learn from it!
Now that the Government is announcing its annual budget, it's time for you as a student or a young professional to plan your own personal expenses. This article will explain what you can learn from the annual budget and how you can get started on your own personal budgeting.
Budget Terms: All you need to know
Let's try and understand some budgeting terms so that when you read about the annual budget.
In an ideal scenario, a revenue deficit should be zero. But in case the Government is unable to match the revenue disbursement with the revenue receipts, it might have to borrow money from other sources.
Just like you have a savings bank account, the Government has, what is called, a revenue account. This account is a detail of all revenues earned by a Government. For instance, all tax collected will be categorized under revenue receipt.
Just like it has a revenue account, the Government also has, what is called, a capital account. This refers to details of all government expenses that have led to the creation of assets that will in turn lead to revenue.
A fiscal deficit is a phenomenon when the Government has gone over budget in expenses and will be required to borrow money from the public to meet the shortfall.
The above-mentioned terms are just a few terms to get you started. You might want to deep dive into all the terms around budgeting to understand the subject better.
Factors that may affect the budget 2021
Some of the factors that will affect the 2021 budget are the industries that did not do well this year – like airlines, hospitality, travel, and tourism. India's job market is under duress and as such, India needs to actively advocate and implement Ease of Doing Business policies that will allow foreign companies to set up manufacturing in India. India also needs to focus on encouraging domestic trade in a time when transit and logistics are taking a hit because many countries have closed their borders and subsequent transit routes.
Why is Budgeting so important?
For a Government, a budget is a blueprint that it will stick to for the next financial year. All of its future expense allocations will be dependent on how it allocates its budgets for the next financial year. Now let's understand why budgeting is important for a young student or young professional like you. Budgeting allows you to understand how much you have and how much you can spend versus how much you want and how much your wants cost. It is a clear framework of your wants and needs. It helps you prioritize between spending on the essentials and spending on the impulses. It helps you start preparing for the bigger picture.
Types of Budgeting
Now, a Government budget is usually of three types – balanced, surplus, and deficit. Each budget allows the Government to allocate its funds on the basis of the availability of funds. A balanced budget is structured and allocated on the basis that the estimated Government expenditure equals the expense receipts in the current financial year. In line with that concept, a surplus budget is when the estimation of revenues is likely to exceed expectations in the financial year and a deficit budget is when the estimation of revenues is likely to be below expectations in the financial year.
As a student or a young professional, you too can plan your budget for the next month on the basis of your expense experience in the current month. At the end of the day, budgeting is all about making personal finance decisions that are comfortable and well suited to your needs and expenses.
5 Ways to Manage your Personal Budget
Just like the Government has a federal reserve for all its savings and revenue, you too need to have a secure place to collect your savings.
Let's say you have your savings in one place – like a savings bank account – next, you need to learn how to spend your money. Here's how you can budget your expenses easily.
Switch to a payments bank
Payments bank applications like Paytm are easier to use because you can add a specific amount of money from your bank account to your digital wallet – so you only spend according to your expense budget.
Save for a rainy day
Unforeseen expenses can make managing your expense budget very difficult. So make a note of possible and potential expenses and collect small amounts of money for any possible large expenses in the future.
Look out for large expenses and see if you can curb them
When you allocate your monthly expenses, you will notice there is always that one large expense that takes up a large chunk of your monthly budget. For instance – if your travel budget for the month is ₹3,000 because you always call a cab service, can you switch to taking the train and reduce that budget from ₹3,000 to ₹300?
Don't spend everything at once
A budget means spending your money in a specific time frame – if you spend everything in one go, you're unlikely to have enough to carry on for the rest of the month. So, learn to control your impulse buys and start spending in bits and pieces.
Make a note of your transactions
Always thinking “Where did all my money go?”
Take note of every transaction that you conduct because this will unearth all those tiny transactions like a random cup of tea or earrings etc that don't let you realize that you might be going over budget.
If you're living up to your budget allocations or spending lower than expected, great! Keep it up. But if you're overspending and need help managing the excess expenses, read on to find out how mPokket can help.
Feeling the Cash Heat? Get a quick loan today!
While the country has an entire team of seasoned professionals to manage its budgets, you need to manage your personal budget. You might successfully allocate expenses each time, but there will always be some unexpected expenses that might turn budgets upside down. What can you do in such a situation? When you feel the cash heat, you might usually turn to a friend or a loved one to borrow some cash. But that's always an awkward conversation, isn't it? Why not turn to the friend in your pocket?
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