While shopping sounds exciting to most people, budgeting doesn’t bring the same kind of delight. Budgeting feels more like losing weight: you need to make a conscious effort to cut down on your food intake, and choose only those that are essential to keep you fit.
With extra cash from your bonus and tax refunds in your hands, now is the best time to spread that budget worksheet and take control of your finances. Like losing weight, you need to build up some good spending and budgeting habits. Plan ahead; figure out if this is the year to start a small business or to take your family on a dream vacation.
Creating a budget
Shiela Ching, a registered financial planner and senior financial consultant at AXA Philippines, says it’s important to budget to keep your expenses in sync with your earnings. To create a monthly budget plan, start by recording all your sources of income. List down all your expected and probable expenses for the month and categorize them based on your expenditure types (e.g. mortgage payment, household utilities, leisure activities, savings for emergency, etc.).
Now it’s time to do the math: Allocate your money under each category, then subtract total expenses from total income. An Excel spreadsheet will make this easy. A person can create his own budget according to his priorities, so the allocations will be different for every person.As much as possible, business transactions and personal expenses should be separated, she says.Set an emergency fund. Providing funds for emergency is a must. Ching suggests that at least 10 percent of income must be kept for emergency; this is besides the other 10 percent for savings. The emergency fund is to be used when a family member gets hospitalized or suddenly loses a job. Keep your emergency fund in a safe but accessible place.Young couple Jig and Jeck Ligon regularly sets aside a portion of their combined salaries in a joint account. This habit worked to their advantage when Jeck got pregnant last year.
See the World
As a financial rule of thumb, 10 percent of your earnings can be allocated for leisure activities, including travel. But if you’re thinking of something big, like a family vacation in Europe, you can place that as a separate category in your budget sheet. Planning is vital to having a successful and budget-friendly trip. Canvass for costs of travel requirements such as airline fares and accommodations, Ching says.
Plan Vacations Well Ahead
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If you wish to travel to as far and as luxurious as Europe, you really need to plan ahead, says Mayi Crespo, general manager of Rajah Travels. Airlines and cruise liners offer discounted fares if you book six months in advance. “For first-timers, we recommend going on a package tour. With a package tour, you have a set itinerary and a guide, which is critical when going around places you are not familiar with,” Crespo says, adding that a fixed itinerary helps you control your expenses. However, be wary of hidden costs. Some tour operators ask for a fee when you don’t join a scheduled tour. Read the fine print or you might end up spending more. If you opt to go on your own, plan everything: where you will go, eat, and shop. Familiarize yourself with the train schedule. Decide how many days you should stay in a particular city. Unscheduled trips can cost you more. When choosing a hotel, consider not just the rate itself but also its facilities and accessibility to places of interest.
Pursue a hobby
Like travel, hobbies make life more interesting and less monotonous. Itemize all the things you think you’ll need from enrolment to equipment. If your budget doesn’t allow for the hobby you want, downgrade a little. Choose activities that can make for frugal sports. For example, basketball doesn’t call for a lot of direct costs, unlike golf which requires a set of expensive clubs. Or opt for second-hand equipment; buy a new one later.
Start a business
Shop around and estimate how much it will cost to put up your favored business. Create a list ofstart-up expenditures: registration fees, raw materials, office equipment, transportation, etc. Studyyour list before making an actual purchase. You may forego some office supplies for a while or you can probably operate with a hand-me-down baking oven, for example. Having a business will eventually help families augment household cash flow. It is also a form of investment that would aid in growing your funds. “Kapag dumadami ang wants mo, humanapka ng extra income. Kasi pag tinipid mo nang tinipid ang sarili mo, darating ang panahon, hindi mo na makakayanang magtipid,” asserts Jeck Ligon who, together with her husband, runs a veterinary drug manufacturing business and a small LPG business.
Stay within budget
Budgeting should not be a painful process. It doesn’t have to deprive you of the good things in life. There’s nothing wrong about giving yourself a little luxury from time to time. After all you work to give yourself and your family a comfortable life. It’s just a matter of planning when to have it, so you would not find yourself drowning in debt. Ching maintains that discipline is the key to successful budgeting, but you can always make adjustments. When you realize you can’t set aside a particular amount every month for that dream vacation, make some modifications on your allocations or take time to identify the excesses and shave them off. You may also consider delaying the gratification to give yourself more time to save. However, when things get more andmore difficult to adjust, perhaps, a change of lifestyle is what you really need.
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Take a cue from the Ligons, who are guided by the principle, live within your means. “Kung di naman kailangan, huwag na magpa-garbo. Maporma ka nga, dami mo namang utang.” Lastly, the couple advises, “Allot a portion of your income for a little charity work. It’s true that it will return to you a hundredfold.”
SOURCES: Shiela Ching, R.F.P., senior financial consultant, AXA Philippines, Makati CityMayi Crespo, general manager, Rajah Travels, ManilaWebsites: financialplan.about.com ; gettingfinancesdone.com