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Wednesday, November 6, 2013

Budgeting: Why is it so hard?

I can definitely understand everyone's dilemma when it comes to budgeting.  I struggle with it too.  And until now, I still overspend, considering I've written down my anticipated expenses every month.  What is it about budgeting that makes it so difficult?

Whether you are financially-literate or financially-challenged, everyone struggles with budgeting.  No matter how much you're earning, it still feels insufficient.  Because the truth is, you're expenses always follow your earnings.  There's always something to spend on.

Budgeting, from what I have understood, basically means stretching your money to cover all your necessary expenses.  Necessary expenses could be utilities, mortgages or rent, car payments, credit card bills, etc.  - bills that come every month.  Your money comes from your salary or income from business.  How can you stretch them?

There apparently several ways to budget, emphasizing its importance.  I bet you have heard some of it too.  I admit there are tips that can be extreme and hard to follow, but that's just me.

I have gathered several tips to properly manage and budget your money.  Keep in mind that these are what I have practiced and what I have compiled.  It is up to you, if you want to follow them.

Starting up
I admit this is not going to be easy.  But once you get the hold of it, this will come to you naturally.  For now, let's take it one at a time.  That way, it's easier to remember.

-  Write down all the bills that come to you regularly on a table, including the amount due (round to the nearest hundreds).  Similar to this: 

(in Philippine Pesos)
Tithes (10%)
Telephone with internet
Pag-IBIG (premium)
Pag-IBIG (mortgage payment)
Credit Card
Car Payments
Investments (UITF)
Investments (Mutual Fund)
Food and Toiletries (5,000 / 2 weeks)
Entertainment (Shopping)
These payments may not be every month and can be unrealistic, but still write it down.  The purpose of this is to find out what you usually spend on.  So just write everything.  We can adjust accordingly.

Also, not all that's written in the table above are applicable to everyone.  It's just a guide.  But I hope you get the picture.

Making Adjustments
Once you have written all your dues, you can now prioritize. 

Tithe is something you have to give back to the Lord, so it should be included in the list.  I am not trying to be preachy or anything, but ideally, Tithes should be 10%.  However, if you feel burdened for giving 10% of your income, then, set a specific amount which you can stick with and feel comfortable giving to the church.  God loves a cheerful giver (2 Corinthians 9:6-7).

If you're working, your government returns (PhilHealth, Pag-IBIG, SSS, Taxes) are automatically deducted from your salary.  I would suggest you take a copy of your payslip to determine the exact amount you pay.  

Put on top of your list your "necessary" expenses.  Those are bills that you have to pay, without fail, and what you use for your daily living.  Those are utilities (electricity and water).  Observe your utilities for 3 months or more.  It is likely that your utilities are of similar amount.  Just give enough budget during holidays (you cook more and you have visitors coming) and summer (because you use your ACs round the clock). 

Telephone bills, even prepaids, have to be budgeted.  Unfortunately, for prepaid sim cards, you never noticed how much you are actually spending.  Also, if you're a subscriber to unlimited calls and text everyday, try to imagine that on a monthly basis.  If unli call and text feature is 25 pesos a day for 30 days (25 pesos x 30 days), that will be 750 pesos a month.  Do you really need the unlimited feature? Do you text a lot? If you do, subscribe for the monthly or the weekly unlimited feature, instead of everyday (example 50 per week unlimited call and text). 

For families with kids, you also have to budget tuition fees and school expenses (including "baon" [allowances] and school activities, projects expenses).  Sadly, it's part of the living expenses which should always be part of the budget. 

In the above table, there's also a budget for Investments.  Commercial banks offer Unit Investment Trust Fund (UITF) for as low as PHP 10,000.  But before investing, make sure you have enough Emergency Fund.  Ideally, your emergency fund should be at least 3-months worth your salary.  More on Emergency Fund later.  Just put aside what you feel comfortable with and would not neglect your other expenses.  

Entertainment... Entertainment can be anything from eating out, buying gadgets, watching a movie, shopping, etc.  You don't need to deprive yourself.  The more you deprive, the more you splurge.  So try to keep your entertainment expense to a minimum.   Setting aside something for it, means you have an option to give back to yourself.  You deserve it.

What it's for?

Budgeting is for you.  Whether you're single, married, studying or working, keeping track of your expenses will decrease overspending.  It minimizes debts and know that you can afford everything you need with the money you already have.

Honestly, just thinking about it makes me tired already.  But this is something that we have to do NOW.  You will reap the benefits once it's established and set.  Believe me.  It works!

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This blog is a compilation of my opinion. Anything written here are original. Should you want to quote any of the posts here, kindly put proper credit. Otherwise, it is subject for approval.

Also, the posts should not be considered as a financial advice. Please consult a certified financial planner for a comprehensive advice on Financial Management, Planning and Personal Finance.

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