How to Prepare Budget Plan for Stock Market Investment
Without goal you cannot know the process to achieve it. Make a goal of budgeting certain amount to invest in stock market. Prepare a budget plan on your own to develop a habit of making it regularly. Budget plan is very simple and require basic excel skills. Most of the successful investors use this budget planner to save, invest, earn and then re-budget it to invest in stock market using their trading account.
Budget Preparation Steps
Step 1 Assemble
To make a budget plan, you need to have items ready you will need for calculation. This includes all your income statements reflecting in bank accounts. It has details of your bills and receipts. You will also need a small pad and a digital calculator. If you are using free software (like mint, buddi or gnucash) to prepare your budget then have that ready too. You really don’t want to run around and stay confused once you sit down to prepare your budget. If you believe in simplicity and fast execution, then make your own using best app to learn trading.
Step 2 Define Columns
Next, make two vertical columns on the page or you can use .xls file and create two columns in your excel sheet. The first column is given a title name “incomes” and the second “expenses”. Now break the two columns and write “name” in right part of the first column heading and then write “amount” next to it. You need 4 columns in all. This is the most basic format and is extremely easy to follow and maintain.
Step 3 Fill Income Details
The next step is to fill income details. Here, write all the incomes that you receive in a month. This can include your part time income, regular salary, any other passive sources of income.
Step 4 Step 3 Fill Expense Details
In this, you record all your regular expenses in the expense column. This includes all monthly expenses including shopping, groceries, fees, gas, entertainment, rent, mortgage, electricity, etc.
Step 5 Income to Expense Calculation
Next, calculate the saving by putting income amount above the expense amount and subtract the two. Don’t worry if you have a certain deficit due to imbalance in income vis a vis expenses. It is easy to fix it but if you have spare money then the next step should be followed.
Now, make both a long-term and a short-term plan simultaneously. Your short-term money planner should be to save some amount for your scheduled short-term needs. Say for instance you want to buy stocks in the next 6 months. For immediate commitments, you must put funds into your short-term account. You have to assign money for things that you wish to invest in and not change your plans due to some emergency expenses, you can at least invest 25% of the actual money allocation. You can avail the help of an accountant friend to plan out your expenses and come up with the best savings to invest plan.
Step 7 Optimize Money
Optimize irrational expenses. These unnecessary outgoings can be expenses such as parties, expensive commutations or lavish clothing expenses that can be easily cut down. Refresh your priority list based on limiting your expenses.