The washer is on, and the spinner is whirring.
Since the kids are in school and I have the house all to myself, I thought to put on my thinking cap and start working on this post. But I’m betting I’ll be finished on this one before the sun comes out again, if at all. It’s not raining, not yet, but it’s definitely not a sunny afternoon in this side of town.
Image courtesy of Stuart Miles / FreeDigitalPhotos.net
And if it does rain, I’m sure as my name is Maricel that I’m going to have a heck of a time finding places to hang the clothes to dry, given that our house is as tiny as a mouse’s lair.
I had been meaning to do one or two more write-ups before traveling back to the city for another week of work, work, work tomorrow. Boy, that SEO content writing stint I took on yesterday kind of squeezed my nerve cells dry. It was my first ever, and I hope I did good enough.
It took me longer than I had planned to finish it, considering that the family also had to attend a baptismal party, but I got to beat the deadline, so yes, kudos to me on that one.
Okay, now, enough about me. Let’s talk about money, or more precisely, budgeting.
The budget
Financial gurus agree, budgeting is the first step to achieving long-term financial goals. According to my favorite resource, Merriam Webster Online, a budget is the statement of the financial position of an administration for a definite period of time based on estimate of expenditures during the period and proposals for financing them.
I admit, I had to read that again, and more slowly the second time around, to make sure I got that right. A bit too deep for my simple mind to dig, I know, so let’s try another definition.
Evangeline Giron of the Filipino-American Community Newspaper, asianjournal.com, defines budgeting as the systematic allocation of one’s limited resources (income) to a potentially unlimited number of needs and wants (expenses).
Giron asserts that budgeting your income, though oftentimes tedious and difficult to maintain, can help you better control how your income is being spent.
Income – Savings = Expenses
So now that we got that out of the way, let’s move on to the budgeting essentials – income and expenses. Note that we will be tweaking the budget as defined above to accommodate what I think is an essential element of a well-planned budget.
- First off, create a list of all your regular monthly expenses, money spent for fun and entertainment included, plus an amount for debt repayment, if needed.
- Second, compute how much you’re making, including earnings you receive from investments and other forms of residual income.
- Third, calculate 10% of your income and label that as savings. Your savings you can later allocate for your emergency fund and future investments. This is paying yourself first.
- Now subtract savings from the total income. Is the difference enough to cover your expenses? If the answer is no, that means you’re spending beyond your means, which is a big no-no if you’re aiming to achieve financial freedom for the long haul.
I understand that the temptation to scratch out savings from the list is so great that you’re now thinking reading this post is a total waste of time. I suggest you think again. If you want to change your financial status, then it’s time to change your financial outlook.
It’s not going to be easy, that much I can say, but if you’re thinking long term, it’s going to be worth it.
Now look at your expenses closely again. Determine if there is an expense you can cut down on or do away with altogether. If you’ve already assessed and reassessed your expenses and you’re still in deficit mode, either:
- you need to land a part-time job and/or do business on the side to augment your income
- or you’re in for a dramatic change in your lifestyle.
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[…] That I will briefly explain in a second. But for further reading on saving, please refer to my previous post entitled Budget 101: Pay Yourself First. […]