Budgeting in Times of Uncertainty
A budget is a spending plan. In normal times, we create a budget and stick to it to achieve our financial goals. In times like these, the more we need to have a budget to prepare for uncertainties in the coming days and month.
For a realistic budget, adopt a zero-based budgeting system. Zero-based budgeting accounts for each peso earned in your entire budget. In other words, your total expenses equal your total income.
You can download the budget worksheet here. The worksheet is in Excel format. It is already formatted for zero-based budgeting. You can add or delete entries to suit your need.
Put priority items on top of the list
The order of expenditures in the worksheet reflects priorities in managing one's finances. You may change the order based on your priorities.
Giving is on top of the list. Giving our tithes and offering is an act of putting God first in our finances. Tithe givers recognized that biblical teaching about tithing is a foundation for financial success. Tithing honors God, the possessor of all things including our financial blessings.
Savings comes next. The goal is to build an emergency fund equal to 3-6 months of living expenses. You also save for long term goals such as retirement funds. Financial experts recommend saving at least 10-15% of your income. This is following the cash flow formula of income minus savings equals expenses. Whatever is left after savings is the allocation for living expenses.
Debt repayment should also be a priority allocation in the budget. Debt can't be avoided especially for big-ticket expenditures such as purchasing a home. But in times economic uncertainty, that could be put on hold. As much as possible, stay away from debt. Avoid using credit cards. Buy items in cash or debit card.
Fun money in your budget
If your budget allows, include fund money in the budget. This serves as your guilt-free spending. Treat yourself for your hard work. Set aside a specific amount in the budget for you to spend whatever you want. Once your budget allocation is used up, the spending stops.
Track your expenses against your budget.
Make it a habit to record all expenses for at least six months. You will be able to analyze your spending behavior. In the process, you can identify items to trim down and adjust your budget accordingly. Use online apps to track your spending On my part, I am comfortable with bluecoinsapp.
The envelope system
To gain control of some expenditure items, such as groceries and "pamalengke", use the envelope system. Pull out from the bank, the cash allocated for these items. Put the cash in corresponding envelopes with labels on these expense categories. Once the cash runs out for that item, stop spending. The envelopes serve as your accountability partner.
Create your spending plan now. Click here to download your free budget worksheet.
"The plans of the diligent lead surely to plenty, but those of everyone who is hasty, surely to poverty" -Proverbs 21:15