CA Ashish Gupta

Every year when the India’s Annual Financial Budget is presented by the Central Government, I listened to people whom they called the experts from different fields on News Channels, Seminars, Budget Talks who analyze, criticize and compare the budget reforms. Such discussions remain on the headlines for 2-3 days and thereafter all the news channels or print media stops such news as they found some other burning issues to discuss. I always thought that one day I will go live on some TV show and will talk about the budget & its impact on the economy. It’s a nice thought and I hope that soon it will turn to reality but to reach there I need to be an expert & have experience on any topic covered by the budget. Well this isn’t about me going to TV show but it’s about how an AAM Admi like me should manage the rising cost of his/her basic necessities from the stagnant income sources?

It has always been a matter of discussion in budget talks that whether an AAM Admi is benefited from the budget or not and its difficult to answer it as these reforms makes few people happy while more people felt unhappy. But personally I do not see any long lasting benefit for the AAM Admi as every time a direct benefit is offered in the form of reduced taxes on income, the same has been taken back through indirect means like by increasing cost of items connected to basic needs. So the basic rule of every budget is “Give and Take” and its outcome in the form of Price cut or Price rise on various items and Tax Savings or Tax Burden affects the pocket of AAM Admi most. But one thing is pretty sure that the ultimate burden is always been passed on to the people of the country and without caring for his/her gain or loss from the budget, the AAM Admi got busy in the daily routine activities to fulfil his/her family’s basic needs.

Being an AAM Admi I always looked for the opportunities where some money can be saved either by way of reduced grocery bills or reduced travel expenses or reduced cost of finance or reduced tax liability. But it’s very tough to absorb the rising cost of the basic items without increase in income. Sometimes I feel selfish for just caring about my own pocket and needs but its my responsibility to take care of my family’s household things for which no one else will come to help me. As I became responsible for the entire family after my father got retired, few questions pops up in my head which worries me a lot that how can I save myself from rising costs? Do I have any means by which this burden can be reduced or What should I do to adjust this burden without curbing my family’s needs?

I started looking for the answers so I talk to people of my age and those who are at the same stage so as to understand their views about this worry. To start with I went to my friends, cousins and colleagues and put forward these questions. Believe me after I finished my talk their reactions were like if I came from different planet. According to all of them, there is no way to get rid of this burden and I should not look for the answers as I will somehow get used to this system as it will come again next year and I will again ask myself the same questions. But I disagree of what they believe and can’t live with this idea of leaving questions unanswered as I believe there is always a solution to a problem. The solution may not be the same which I am expecting but there has to be some, so I got serious about finding solutions to my questions and to do that it is very important to understand the problem first.

This is really interesting that sometimes questions become your answers for some other questions like why the rising cost is a problem? Am I not earning enough to adjust the rising cost? If Not then how the situation can be improved? If Yes, Am I worrying about lesser savings for the future which is so uncertain? I found my answers in these questions and understood that the real problem was not the rising cost but it was my income which is not rising proportionately. The answer is to focus on getting more money rather than focusing on saving more or the rising cost. But the possibility of earning more money from a single source is very less and trying any other source would require extra time & resources. But an AAM Admi is not equipped with these weapons and secondly in this competitive world everyone is running to earn more money while the number of genuine opportunities for the same is very less. So the probability to get an extra source of income is almost negligible.

Being finance professional, I believe that if you don’t have ways to increase your revenue side then you must find a way for its optimum utilization so as to cover the rising cost side. It is easy to say that one should spend his/her income wisely and avoid unnecessary expenses but actually doing it is not less than impossible. Well I found a way to do that by preparing budget for annual expenses at home and allocate the revenue to each of such expense based on their priority. Like the Government presents its budget to the Country for its annual Revenue & Expenditure, I thought to prepare the same for my family too. I didn’t know whether this will work or how it is going to help me but if our Government manages Finance for the whole country through preparing budget then finance of a family of four can also be managed with it. But I need to be very cautious while doing so, as unlike our Government I have no ways to finance any % of deficit.

The easiest way to prepare a Budget is by amending the last year’s income and expenses which I expect won’t change significantly as the number of family members will not get changed anyhow and the two earning members will not be leaving anywhere. So I took my last year’s expense & revenue details to make estimates for the coming year. I could easily identify the nature of expenses and clustered them in two categories i.e. planned and unplanned like the Government does in its Annual Budget. But it is very sad that there is no unknown source for my income last year so unlike my expenses I will have no unplanned income for this year.

It is easy to estimate the income side as it contains very few items and I expect to make a total inflow of Rs.50K per month in the coming year after considering all the sources. Now, I have to allocate an amount to each item of expense categorised under planned & unplanned expenditure. Planned expenditure are those expenses which you already know that it will form part of your cost of living and it includes expenses like Rent, EMIs, school or tuition fee which remains fixed & expenses like grocery, utilities, travel cost or other household items which varies month to month. While unplanned expenses are those which you cannot anticipate like hospitalization cost, loss or damage of your vehicle or electronic gadget like TV, mobile or laptop which sometimes eat up big chunk of your budget. Though it’s difficult to predict such expenses but based on the past experience some amount can be estimated. So based on the last year’s data, I list out my expenses in order of their priority and have segregated them in two categories i.e. basic & luxury as given below:

Particulars Basic Needs / Binding Cost Comfort / Luxury Budgetary Allocation (in Rs.)
Rent Y 156000
Kitchen Grocery Y 84000
Food Items Y 48000
Utilities cost Y 24000
Household Items – Consumables Y 30000
Telephone/ Internet/ Travel Cost Y 35000
Insurance Policies Y 40000
Income Tax Y 15000
Festival Celebration Cost Y 12500
Gifts on Various Occasions Y 7500
Medical & Other Personal Cost Y Y 12000
Maid Salary Y 12000
Cost of New Wearable Y Y 20000
Entertainment Cost Y 5000
Holiday Trip Cost Y 20000
Total Planned Outflow (A) 521000
Unplanned Outflow (B) 60000
Total Budgeted Outflow (A+B) 581000
Total Budgeted Inflow (C) 600000
Savings (A+B-C) 19000

* Expense Items have been segregated based on my own way of living with no set of rules.

While preparing this chart I understood one thing that either I will spend money on meeting basic needs or for enjoying luxury and I have to choose which one is more important. It will be completely a person’s choice on how his/her money should be spent which a wise person does after considering the family needs first. I cannot think about my luxury over my family’s basic needs and it would be absurd if I say that I have been forced to spend excess amount on luxury items and to meet my basic needs I took burden of debt.

With this statement, I got to know that if my planned outflow for basic needs is below Rs.38000 averagely per month and unplanned expenditure up to Rs.5000 per month then I would be able to enjoy my budgeted luxury with small savings at the end. Now I know the limits of each item of expense and I have to put my efforts to keep it within those limits else I will loose in this game. I know that the budget is only an estimation of future events which may vary from the actual but to get maximum benefit out of this exercise I have to monitor it by comparing the actual expense with the budgeted which will help me in taking financial decisions. I wouldn’t have to worry if actual amount matches with budgeted but in case my expenses surpass the allocated amount then I need to look for the options to finance it either by extra income or by debt. Through this way I think an AAM Admi would feel supportive in a way that he/she knows in advance that how much money is required every month for the basic needs and they can also plan about spending the rest of the money.

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  1. Jitendra Sharma says:

    It’s true that every one is considerably aware of ones own budget and also try to tackle the same without any one help, it is we who are little graduate- give so much importance to budget- othrwise the small construction worker/ labour in factory does nt care for the same- than too he manage and is enjoying all the necessity of life- only he does not incurre exp on luxuries.
    How ever nice direction for the one who does nt estimate the exp and do nt forcast the income to be derived.
    We have to do some extra work to enjoy extra benefit over and above routine .

  2. CA Dinesh Kumar says:

    very nice and gives a thought to optimize expenses for AAD AADMI. Just to contribute, if Cash Flow methodology can be given along with this article, it would be of more help to plan for unplanned expenditure.

  3. Ashish Gupta says:

    Thank you sirs for your appreciation…it is strange that the people with whose support these politician reach to Parliament are generally least benefited but those who didn’t go to polling booth takes lot of goodies from the budget…

  4. ca sivasubramanian.c says:

    it is nice. i do thing of like this and it truly relects the exact position. for aam adhmi carries real burden. even you wish to buy a residential house for rs.15 lakhs in a apartment you have to pay additionla 14% service tax. but ambani may construct his own house for a cost of Rs.2600 crores without paying to serivce tax, buys in a partment building. similarly wealth tax upto current year is payable to a person holds one cost rs.10 lakhs+jewellery rs.10 lakhs+vacant land rs.35 lakhs. then wealth tax shall pbe payable on rs.5 lakhs.for ambannis everything is exempt. whether, business investments, shares, etc. all cars can be taken for business purposes. where is aam adhmi. this is way budget presented in india.
    further how lobg each states and union presented dificit budget. even after independence about 68 years. there must be time frame for atleaset for states.

  5. suresh says:

    We may represent to the finance minister to reduce the third IT slap to 25% from 30% like offered in the case of companies.

    Or we may approach FM/GOI. to reduce the slaps to 8%, 15%, and 25% instead of 10%, 20% and 30% respectively.

    this way some considerable amount can be saved from the IT payable amount. Otherwise 2 month salary we have to loose by way of I.TAX. and 1 1/2 month salary incase of availing HBA deduction.


    Thanks Mr, Future finance Minister,
    great Job,
    लगे रहो यार, करत करत अभ्यास ,जरिमत हॉट सुजन,

  7. J C Thukral says:

    Really a nice way to remain financially sound and run your family smoothly without being caught in the debt trap. Not only this, we can make savings for future also. In fact I have done it for years. Though I have retired, I still make my annual budget to know whether the monthly pension would b sufficient or not.

  8. sridharan says:

    very innovative and your aim will more emphasised, if you will do a small exercise
    of comparing the figures the tax benefit given with reference to cost increase in monthly house hold budget, not for all but for very few major expences item which itself will prove negatie benefit which is imposed right from india’s first budget.

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October 2021