Budgeting Tips

People have different techniques in budgeting their money. Some, on the other hand, are quite lax in handling their finances. In my opinion (and I know you’d agree too), budgeting is a necessity to not overspend on things and to help us save for the future.

I started budgeting strictly around five years ago. I downloaded a simple expense manager app from Play Store, played around with it, and got addicted to it. It’s quite stressful to record every expense I make but it helped me track down how much I spend on things.

Here’s the process I went into when I started budgeting:

1. Creating categories. In every expense manager app, you have to set first the categories. It entirely depends on you, but there are the general ones like Food, Transportation, Rent/Mortgage, Bills, and Shopping. In my case, I have more than 10 categories. You can make more specific categories like Electricity Bills, Phone Bills, Internet Bills, etc.

2. Setting limits. In a typical day, add up your usual expenses in a category, like Food, and then multiply it by 30 days. For example, if you spend an average of Php300 a day for food, then your typical budget would be Php3,000 a month. Remember, this doesn’t include when you eat in a fancy restaurant so you might want to add more depending on your income.

3. Creating accounts. If you manage more than one bank account, you can create multiple accounts in your app. For example, if you earn money and you decide to put it in your Savings Account, then you record that as an income in the app. If you take money from that account (by either spending or transferring to another account), then you must also record it. In this manner, you can monitor your cash where it goes between your accounts.

4. Reviewing your budget. You cannot perfect your budget in one go. For sure, there will be many alterations to it through time. Observe if you’re being too strict on yourself or if you are over-budgeting.

5. Observing the trends. If you’re recording your expenses for quite some time, like six months or one year, your data can give you insights on how you spend your money. Are you spending more on food through time? Are you spending a lot of money on shopping? Remember, your records don’t lie.

6. Evaluating your budget. Like companies, each individual must also evaluate his/her budget regularly. You can ask for advice from other people if you’re having a hard time budgeting. Ask for their opinions. If you can’t decide if it’s OK to spend Php5,000 on clothes each month, given that your monthly income is Php20,000, then ask a friend. 😉

7. Monitoring your savings. Check also if you are saving enough money for contingencies, but it’s entirely your choice if you want to save or not. Some people prefer to spend their money all out.

The Most Important Expense Category

What do you think is the most important category? Is it food? Is it your rent or mortgage? Is it shopping? People tend to prioritize these expenses that many forget one very important category, and for me it’s the most important one: Charity.

Yes, I do have a Charity category and I also set a limit on it, not that I don’t want to overspend on it but I have a limited income like most of you. Some of you may ask: “So you record also the alms that you give?” Yes, I do, because it’s part of my expense data.

The Charity category is included in my first set of categories because I believe in the power of giving. As the Bible says, it is more blessed to give than to receive. True enough, I receive more and more blessings each year and I thank God for that.

So I encourage you to do the same. You can start small, then through time you will feel that you want to give more. It’s better to give to those who are less in life than to spend on something you don’t need. Believe me, you will feel better and you’ll be blessed. 🙂

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