Back to Basics of Budgeting (Part 1)

  •  
  •  
  •  
  •  
  •  
  •  

We often hear about budget whenever one buys something. Some says, “There is no enough budget for that”. Others say, “I already set aside a budget for that”. Now comes the key question, do we really plan for a right budget for everything and seriously executing it?

In our everyday living, there are many perceptions on budgeting, income and expense, watching and tracking spending. Are you one of those who track their expenses?

Before going further, what is budgeting? As what John Maxwell clearly defined budgeting, budgeting is telling your money where to go instead of wondering where it went. The definition standpoints its future that something you planned for or that you know where your money go, it is making sure that you are spending less than you are bringing in and planning for short to long-term. This point in time, many people think of budgeting as depriving themselves and they avoid it. We knew some people who are like this. Being such, they do track their everyday expenses no more.

Just like a diet and work outreally just a program of eating and exercise, budgeting is just a program for spending. Because most of us after a week from pay day, we look at our wallet and we say where my money went; what did I spend on?If you are hitting a mental roadblock when you hear the word budget, just call it by a different name, such as personal financial planning.

Planning your budget is a significant element of financial success. Many say, “It is difficult to execute”. But what is trying to plan and seriously executing it to being hard up with finances in the near future?It is not difficult to implement, and it is not just for people with limited funds. Budgeting makes it easier to all of us to make conscious decisions about how we would prefer to allocate our money. This helps a lot people save for retirement, financial emergencies, etc.

Having a solid budget in place, knowing how much exactly where your money is going makes it easier for you to sleep at night.

And we reiterate, budgeting is not something to do only when you are short on cash. Also, budgeting is not just for parents. It is for all ages that are barely able to make ends meet.  It is best for parents to teach their children as early as grade school. Some college students might turn to a budget to figure out how to make their high expenses and allowance. Young professionals create budgets to make sure they are properly allocating their first paychecks among emergency savings, retirement savings, rent and utilities, and rewards for their hard work like new gadgets and nights on the town. Young couples trying to figure out how to afford a wedding, or newlyweds wondering how to fit the expense of buying a house or having a child into their monthly cash flow, are also likely to make budgets.

Budgeting is essential to all ages. Where do you think an established and well-knowncompany like PLDT would be today without proper budgeting? What about wealthy people like Henry Sy? There’s no way that he or his holding company, SM Investments Inc., could have achieved such success without paying attention to their monthly, quarterly and annual cash inflow and outflow. Budgeting would not just get you out of a rut – it can also help you get rich.

Most people only have two parts in their budget:

The first part would be theincomewhere all the money that you earn whether from employment, side jobs, remittance or gifts. The second part would be the expenses, where the amount of money you earmark for payments or outflows. But a budget should have a third part a savings, the amount of money you set aside to be used for a future goal.

Let’s look at some methods budgeting can help you attain your goals. A good budget will help you do the following:

Plan short, medium and long-term target.
A budget will help you plan for short-term expenses, like your monthly bills, and medium-term expenses, like vacations, as well as long-term expenses, like buying a car or a house, paying for a child’s college education and putting money away for retirement. Get a notebook to write on how much money you expect to make over the next few months, how much of that money goes out every month and how much you left to save each month. By doing this, you will always know when you need to cut back on spending, when you can afford to loosen the reins and how long it will take to save up for major goals.

Set emergency fund.
Say, a significant expense arises unexpectedly. How would you address it? How can a budget help you handle the said significant expense?

If you are new to budgeting and do not have any emergency savings yet, or if your savings have already been depleted by another recent emergency, your budget will help you determine what expenses you might be able to postpone or shift around to help you pay the unexpected bill. Maybe you cut your next month’s grocery bill from 1,500 to 1,000. Or else, go out to eat once in a month instead of once every week.
Get the Most Out of Your Money.
Chances are you spend at least 40 hours working each week, and that doesn’t include the time you spend getting ready, the time you’re forced to be away from home because of commuting and lunch time, or the hours of free time that get lost because you’re too tired from working all day to enjoy them. If you’re going to dedicate that much of your life to earning a living, you owe it to yourself to make sure your money is going to the things that are most important to you. A budget helps you track all your expenses – large and small.

Plan for Major Changes. 
As mentioned earlier, a budget lets you model in advance how a major purchase or life change will affect your finances. Instead of wondering if you can afford a house or panicking about whether you and your spouse can afford to live on one income while the other stays home to raise a child, you’ll have the data you need to crunch the numbers. You’ll find out before you make any change whether you can afford it and what sacrifices you might need to make.

Having Money in the Bank, Cooperatives, or any investment houses.
By helping you sock away money each month, budgeting is an important tool for achieving financial freedom. The ultimate freedom, of course, is being able to retire, but along that winding road are opportunities for many rest stops if you have money in the bank, cooperatives, and or any investment houses.

***

We are conducting Retirement Planning and Wealth Accumulation and Preservation seminar for free. If interested, contact us with our mobile number stated below so we can arrange a schedule for your group. It is our pleasure to give you a free seminar and we’ll even provide snacks.

(The writers are both Wealth Analysts of a reputable Financial Company and are both active Licensed Real Estate Practitioners. They also engage in Stock Market Investing. For suggestions and more details, you may contact them with CP # 0919-376-2922 or Tel.No. (074) 244-4026.)

Comments