Budgeting Tips

You can't grow money out of trees. And you can certainly not get to a million without a piso / a dollar. So let's talk about budgeting.

1.) Determine your cash inflows.

The question to ask is where does this money come from? Are you employed and get a monthly salary? Are you a student and get stipend? Are you getting an allowance from a corporation or a family member? Figure out where the money comes from. If there is no cash inflow we can't begin. (Just in case you realize that you don't have an inflow before going to step two establish one first. Get a job or a scholarship or allowance or stipend or retainer.)

2.) Draw a line between wants and needs.

Wants and needs varies. For instance, a car is a want for most people but if you're living with an old sickly grandmother you'll realize you need a car. Or if you have a pregnant wife and live far away from the hospital, the convenience and security the car provides you will easily make it a need. Map out what you need in your life. Follow the basic needs of food, and shelter. Factor in transportation cost. If you are just starting out in the industry you might need clothes. Normally I tell everyone asking me for advice to think annual. A venti doesn't look like much but if you convert that to annual costs you'll realize how much you could have saved.

3.) Map out your budget.

Again, normally I would ask my friends and family to do this annually. But for some people 100,000 PHP/USD would seem too much and I understand how that can be overwhelming. So map out your budget based on what's comfortable for you. If you earn on a weekly basis you can do a weekly budget. Whatever is comfortable for you since you're starting out.

4.) Set a goal.

Okay now that you've figured out you only use half the inflows for nneeds you can set a goal for the other half. Its always nice to visualize the finish line. Are you saving up for a nice car? A new home? An exciting vacation? For retirement? Once you have that you can see how long it would take before you can realize the goal. I know a friend who cut his food expense to a quarter to buy a car within the year. This is why you need a goal. If you want to get something out of it you have to have a clear idea of the finish line.

5.) Track your expenses and re-evaluate every (depending on the budget you set) week/month/year.

Personally I would suggest this to be bi-monthly. It helps you check if everything is in order. You can re-arrange your finances quickly and if you go out of budget you can catch the reason early on.

6.) Establish an emergency fund.

If you're only starting to save now (for whatever goal you set) do set up an emergency fund. Because there are risks in our day to day life and if we don't set up an emergency fund when we get a disaster we end up losing our budget. What if you lose your job? Or if your car breaks and you need it repaired? I recommend an amount that will keep you afloat for three months. So check your expenses. How much do you need in order to survive for three months if you lose your job today? Why three months? Because it takes about a month to look for a job. And another month to receive a paycheck. The third month is your buffer.

7.) Reward yourself.

Okay, lastly reward yourself. You were disciplined enough to keep a budget. You deserve a treat. Don't deprive yourself because you worked hard for this and you deserve it.

Xo,

Paula