How can budgeting make you grow your money and help become financially free?




How can budgeting make you grow your money and help become financially free?

A lot of time I come across people who have big cars, apartments in big cities, luxury watches and all of the stuff which you might think can be afforded by only someone who earns at least a couple of hundred thousand dollars a month. But the sad reality is that they have taken debt for such things and fallen into the vicious debt cycle. Because in today's world you can get debt for anything. This debt not only takes away your sanity and peace of mind, but it also sucks away all your earning because eventually, you are paying off more money in form of interest for something which is not worth that much.

This problem arises mainly due to not budgeting all your expenses and incomes and not being aware of where your money went. Today, I just want you to take away from this blog how you can manage your money in a well-designed manner and can achieve financial freedom in a matter of a few years.


  1. First of all, take a piece of paper or an excel sheet if you are comfortable and write down your income from whatever source you get that. It can be interest on your savings account, interest on FD's, returns on mutual funds, dividend income from stocks, rental income from property, or any other income. Now take the gross income(including tax) here.
  2. Chalk out how much tax (monthly as well as yearly) on an average are you paying for all these incomes and then just set that aside. The remaining income is what actually becomes your disposable income. The whole play of budgeting takes place here. Congratulations, if you are really doing this, you are gonna make a massive improvement in your wealth and gain financial freedom.
  3. Now, start chalking out what all places does your money go out every month. If the amount changes every month (like electricity because it depends on the season), then simply total the bills for every month and divide by 12 for getting an average payment per month. This will include only those cash outflows that are never coming back to you. So technically all expenses like food, electricity, maids, maintenance fees, travel expenses, money spent on attending events (birthday, marriages. etc.), clothing, petrol/diesel, children's education fee, monthly EMI, etc. Once you have completed this list, you will have the average monthly expense you incur every month.
  4. You can now simply deduct the tax and average monthly expense from your income, to get the amount left for what I call the investment account. Since you took gross income, so this will include the money going towards any insurance scheme, provident fund, superannuation scheme, and so on. The above are usually investments for retirement money. So simply deduct all these deductions, if you have these, from your investment account balance. This is the amount you have to use to increase your wealth. Use it in below-prescribed fashion.
  • 35% - Investment in stocks through direct investing or through mutual funds.
  • 40% - Creating deposits in your bank every month and let it grow and then use only for creating rental income. Don't be mistaken, rental income does not mean only rent on real estate. It will include rent on a leased car, rent on leased camera and equipment, rent on music instruments, rent on books, and any other object you could think about. However, the most recommended is real estate.
  • 15% - cash to be kept in your savings account to maintain liquidity (untouched) and piece of mind.
  • 10% - fun account (vacations or any leisure spending).


Try this out to manage your money and see for yourself where you are at in 2-3 years. I guarantee you will be at a much better position than now.

Thanks for reading!

For the latest updates follow @ rdhmfinance on Instagram!

Comment on any query you had like me to address.

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