Wazzup Pilipinas!
In the old days, things were fairly cheap. In today’s economy, those prices are definitely a thing of the past. No one can blame you for wanting new or nice things--be it a grand birthday bash or a wedding celebration, traveling, or buying the latest mobile device.
If, however, you don’t closely watch how you spend your money, overspending can quickly overtake you, without you realizing it. To prevent overspending from happening, here are some tips to help you budget your hard-earned cash:
1. Understand your expenses
To turn a new leaf in your spending habits, you must first assess any damage. You have to understand how much you’re spending on a daily, weekly, and monthly basis. From there, you can adjust your spending accordingly.
Learn to decide between what is essential and what isn’t. Reflect on your purchases and assess what kind of activities you’re currently doing. Look into your average and maximum spending amount, and list down which of those expenses are necessities and which are not. Remember to add the important costs such as your bills and tax payments.
Once you’ve created this list, add your other expenses. This will clearly give you an idea of how much food you buy, how many times you shop, go out and eat with your friends, and shop.
Note down all your expenses in a spreadsheet or on paper; so you could actually see your total spending. You’d be surprised how much cash goes into seemingly harmless things, like coffee or milk tea, daily.
2. Create a budget spreadsheet
Start planning your budget in a spreadsheet and learn to categorize your different expenses such as your monthly fixed payments on rent, electricity, water, phone, car, etc., along with other expenses.
Aside from this, categorize your income-generating avenues such as your monthly salary, your side hustle money, tips, investments, etc. Cross-reference these with your categorized fixed payments. Then ask yourself the following questions:
Is your income just enough to pay off everything?
Do your expenses surpass your current income?
Do you have enough cash left to save after deducting all your payables and expenditures?
This will allow you to create a budget allocation percentage or amount to certain expenditures. Try the 50-30-20 budget method.
3. The 50-30-20 budget
In Budget 101, the 50-30-20 method is usually practiced. This means that from your total income (the total amount of all your income-generating avenues), 50% goes to your needs, including your monthly fixed payments (rent, car payments, utilities, insurance, etc.). Then 30% goes to your wants.
This would mean the 30% would go to any unnecessary expenses such as shopping, dining out, travel, hobbies, monthly subscriptions, etc. The remaining 20% is then allocated to your savings. This 20% is the fund you shouldn’t touch and will be kept. You will use this money in the future for your retirement or something important such as purchasing your first house, your wedding or pursuing further education.
4. Give Every Cent A Home
Another method in planning a budget is to essentially empty out your account, not by spending but by distributing and allocating every cent of the fund that goes into your checking account. Have it automatically allocated to different accounts such as your retirement fund, a savings account, or expenditure account.
Withdraw the money to pay your monthly bills. Essentially, the idea of a “Zero Account” will keep you from thinking that if you have cash to spend you’ll do so willingly. Now if your account has a zero balance, you can’t spend what you don’t have. This will automatically make overspending impossible, at the same time, this strategy will help you grow your funds
5. Habitual tracking of daily expenses
One way to stop from overspending is to develop the habit of tracking your expenses. Literally, after purchasing/spending, automatically take note of it. Tracking your expenses allows you to develop financial consciousness and awareness. You’ll be able to assess where you can adjust your expenditures.
Do you really need that new dress when you just bought one a month ago? Do you really need a new phone? Do you really need to buy another milk tea when you just got one yesterday/early in the morning? Habitual expense tracking allows you to decide on the spot if what you’re spending/purchasing is worth losing money for.
6. Avoid using credit cards, stick to paying in cash
One big cause of overspending is the misuse of credit cards. Without knowing it, your 10th swipe has already caused you to spend beyond your budget by 10%. Credit cards will allow you to incur debts and without knowing it, you might have a hard time paying off credit card debts.
To prevent this dilemma and temptation, stick to paying in cash. Physically holding your money and seeing where it is spent will allow you to feel and decide if something is worth spending your hard earned cash on. It will even give you the consciousness to deposit your money in your savings account and retirement funds.
7. Keep an Eye Out for Cheaper Alternatives
Of course, budgeting your money and keeping yourself from overspending doesn’t necessarily mean you’ll literally have to start missing out on living your best life. It just means that you should look and go for cheaper alternatives of all the things you want to do. For instance, be on the lookout for cheaper flights or go couch surfing instead of booking a really expensive hotel. Should you wish to hang out with your friends, maybe settle for a catch-up over coffee instead of over a full-course meal. It will also help if you fully disclose with your friends and family that you’re starting to save and that you would greatly appreciate their support by offering cheaper alternatives. You’d be surprised; some might even praise you for doing so, as you demonstrate maturity in financial management.
8. Avoid debt--and paying debt with debt
Overspending will eventually and literally lead you into debt, and there are consequences behind unpaid dues. Remember those credit cards? Try to avoid incurring debts with them. If you do, and you find yourself in a tight spot by not being able to meet payments, don’t be tempted to acquire loans to pay them off.
Paying your debt with debt will trap you in a vicious cycle of never-ending payments. This will leave you with nothing to put in your savings account. Should you find yourself in a tight financial spot, understand that you would have to put your foot down and make the necessary sacrifices, to pay off all your debts. Learn to live without having to use your credit card or borrowing money from your friends.
9. Learn to invest
Financial management maturity comes not only with knowing how to budget, but also with knowing how to grow your finances. Instead of spending your money on different vices or unnecessary items, why not invest them?
Research on various investment options and choose which one is doable for you and is compatible with your financial goals. Investing your money will be really good for you in the long run, as it will allow you to double your money, providing financial stability, long-term. Seek out your banker or a wealth manager consultant to explore your options.
10. Set financial goals
Don’t get stuck with meeting your monthly payments; instead, learn to set short- and long-term financial goals for yourself; so that you could push yourself to save more and grow your finances. Setting financial goals will help motivate you to work harder and earn that necessary income.
Financial goals could be earning that first million or earning enough to save for retirement. As you continue the habit of budgeting your cash and getting rid of your overspending problems, you become more aware of how much you would like to have in the future.
Bottomline: To meet your financial goals, you need to be disciplined enough to follow your budget strictly and learn how to put your foot down on certain situations. At the same time, practising delayed gratification will surely go a long way in allowing you to achieve a worry-free financial life.
Bio: Jason Garcia is a manager of a family enterprise, property consultant and a writer. He has a niche blog for property leasing and real estate investment. He has been writing articles advising readers on how to secure and invest in homes and business and also has a varied background in real estate brokerage.
https://www.investmentdad.com
Ross is known as the Pambansang Blogger ng Pilipinas - An Information and Communication Technology (ICT) Professional by profession and a Social Media Evangelist by heart.
