To many of us, budgeting feels like depriving ourselves of the things we want. Well, to some extent, yes, we can't always get what we want. But that doesn't mean that we won't be able to enjoy our money, and buy the things that we want from time to time. I believe that life it too short; I've learned that the hard way. So I believe in living each day at the present, live each day like it was my last. Well, that doesn't mean that we should splurge everything today, and forget about our future. I do believe in living the present moment, and enjoy every second of it. But of course, I still make it a point to plan for my future, and just hope that I would still enjoy the future.
I've learned from my mentor Bo Sanchez an easy way to budget your income is to divide your income and put it in different envelopes. It's a system he designed for his maids, yes for his katulong, but I think it works for everyone. He encourages everyone to use his system, his logic? If his maids can do it, why can’t we? His goal is to actually teach his maids to invest in the stock market, which I myself have started to do. I will share this as well on my next coming entries. In order to do that, he taught his maids on how to budget their salary, and to invest a part of it in the stock market.
- First Envelope: Tithe Fund
- Second Envelope: Expense Fund
- Third Envelope: Support Fund
- Fourth Envelope: Emergency Fund
- Fifth Envelope: Retirement Fund
1. Tithe Fund
As what I said in my first entry Giving Back, I believe that the secret to being rich is to give back. As advised by Bo, 10% is a great biblical guideline to follow, but it's not like mandatory. I admit that I myself don't follow that guideline, but I promise myself I would follow that once I got promoted. For now, I just set it to P600 by donating to World Vision monthly. For me, tithe doesn't necessarily mean donating to the church, I believe that it could be anything, as long as you're purpose is to help others. It could be any charity or donations, as long as you give back and remember that what you are receiving now is all a gift from God.
2. Expense Fund
I think this is the most difficult to budget, since it's something that we most spend to. Your expenses would depend on how you live, whether you live in your own house, or rent a condo or apartment. The idea is to manage your expenses based on necessity. Needs not Wants.
Since I still live with my parents, I have the comfort of living at home, and not worrying about monthly bills such as electricity, water, telephone, cable TV or internet. So I divide my expenses further to the following categories based on necessity:
Food and Transportation - This is the bulk of my expense since I have to eat at the office and commute to and from work. I had to eat lunch and dinner in the office, because of my work shift, so in order to save up, I usually bring cooked food from home for lunch. I try to limit my food budget to just P200 per meal, so that's like P1000 per week. Toiletries and Vitamins- For my other needs such as toiletries and other food, I usually buy them in the supermarket once a month. I just set my set grocery budget to P1500 a month, both for my vitamins and toiletries, and other food.
Travel and Leisure- I love to travel and go out, this is my way of relieving stress and blowing off some steam. I usually go out with friends, either Friday or Saturday night. I try to limit my expenses when going out to just P500, since we usually just watch a movie and have dinner. So I set my budget to P2000 a month. If I have time, I always go for longer vacations, either out of town, or out of the country trips. My ultimate dream is actually to travel around the world. I even have a different blog dedicated to it Posh but Cheap Travel. So I really try to travel in a tight budget, looking for seat sales for airfare, and just stay in hostels and guest houses for accommodation.
Clothing, Books and Others- This is the least of my priority at the moment, and the most difficult for me to be honest. I love clothes, and I am a shopaholic at times. But I do try to control myself of buying clothes, since I already have a lot that they all can't fit in my closet. So I do buy from time to time, just when there is a sale. I also love to read, so I try to buy one book a month, but right now I still have a stack of books that I haven't read yet so I'm also stopping. So if I have extra money, I usually just spend it for my travel and leisure.
3. Support Fund
Since Bo designed this budget for his maids, the support funds refer to the money his maids send to their families back in their hometowns. This is their primary reason of working. I have translated this to the money I give to my mom every month as a share to the household expenses. I just give P2000 to my mom monthly, but I also promise myself that I will give more once I got promoted in work.
4. Emergency Fund
Most finance mentors would say to set up an emergency fund. They say about 6 months worth of your salary is enough as emergency fund. From the word itself, it's for emergency, so you really can't spend it unless it's really a matter of life and death. Well to be honest, I have just like 3 to 4 months worth of emergency fund saved in my bank account. But I have set another emergency fund with my salary. Since the company I'm working in has a cooperative, I availed their savings scheme which would automatically deduct a part of my payroll and put it in their money pool. Their interest rate is quite high, averaging at about 9% annually, so I choose it over saving my money in the bank. I can just get it anytime I want, so I set that as my emergency fund.
5. Retirement Fund
The last and most important fund, is actually the retirement fund. I've tweaked it a little, and added another one which is my Business Fund . This is the fund that would be invested in the stock market. Bo advises his maids to invest in the stock market, so that when they retire, they would be millionaires. Yes, you heard it right, millionaires. Bo has also a different scheme in investing in the stock market with lesser risks, by investing regularly but within a longer time frame. I would follow this scheme as well, and would share it to you guys in the future. I have invested in 2 different but similar schemes, the mutual funds and stock market, which I would divide as my Retirement Fund and Business Fund.
I am just working for almost 2 years, and I know as early as now that I don't want to work in the corporate world as long as I live. I am planning to work until I'm just 30 something, after that ,I should be ready to retire and be my own boss. I actually have a far-fetched goal of becoming an entrepreneur at age 25, and I will be trying my best to achieve that goal. Of course, I wouldn't quit my job right at that moment, but hopefully I could have something part time. I'll share that to you as well, in the near future. And hopefully, I could call myself an entrepreneur by the time I'm 25. Wish me luck! :)
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