Have you ever accomplished something important without planning first on how you will do it? I guess not. Even the simple things that you do require some sort of a plan; if you want to eat lunch at the mall you plan where to eat and what time to go, how to get there and decide what to eat. Kung wala kang plano, baka malipasan ka na ng gutom di mo pa alam kung saan ka kakain.

It’s the same thing with spending your hard-earned money. Without a good plan on how you will use your money, you could end up spending more than you have to. Creating a spending plan ensures that you “spend less than you earn,” which is a major requirement in saving and wealth building. The spending plan, also known as the “budget,” helps you manage your money properly and prevents you from overspending. Ang budget ay hindi diyeta sa paggastos kundi isang epektibong paraan para masigurado na tama ang paggaamit mo ng iyong pera. It is an essential tool to help you achieve your financial goals.

These are the steps involved in creating an effective spending plan:

1. Know how much money you earn.

You cannot budget what you do not know. So, the first step in creating your spending plan is to find out how much you earn regularly. Your income can come from two major sources: active income & passive income.

Most people only have active income, which is money earned for work or services you have performed; kadalasan ito yung sweldo mo sa trabaho. Ang kinikita mo sa isang negosyo, raket o sideline at mga commission sa pag-aahente ay kasama din sa active income. Passive income comes from earnings you receive with little or no work required. Matatanggap mo ito kahit hindi ka nagtatrabaho. This includes interest on deposits, investment earnings, rental from your properties, pension, dividends from stocks, and overriding commissions from multi-level marketing.

2. Find out where your money goes.

You cannot manage your money properly if you do not have a good idea of what you are spending on. Before you can set a budget for your expenses you have to determine where exactly your money goes. If you cannot recall accurately your expenses for the last two months, here’s how to do it.

a. For the next one or two months record all your expenses.

b. At the end of one or two months summarize the list. You will probably be shocked to find out that you are spending hundreds or thousands of pesos on things that you don’t really need.

c. Examine your expenses and determine which items are not necessary. Decide which expenses you can reduce or eliminate.

3. Set a reasonable budget for your expenses.

Once you have a clear picture of how you are currently spending your money you can now set a budget for all your expenses. Make sure that the budget for each item is reasonable. The amount doesn’t have to be exact, a good estimate will do.

A typical monthly spending plan should include a budget for savings & investment, premium payments for insurance & pre-need plans, housing expenses, debt/loan payments and general expenses like groceries, utilities, tuition, transportation expenses, clothing, entertainment fund, etc. For periodic or seasonal expenses like car insurance, tuition fees & premium payments, set a budget for the monthly equivalent. Halimbawa, kung P12,000 ang tuition fee for 6 months, set a budget of P2,000 monthly and set this aside.

4. Implement the budget and stick to it.

Walang silbi ang ginawa mong budget kung hindi mo ito gagamitin. So, follow your budget strictly and stick to it. Continue to track your expenses, especially during the first few months of using a new budget, so you will avoid overspending. Avoid “juggling” your budget. Kapag naubos na ang budget sa isang item, hangga’t maari huwag mong gamitin ang pera na nakalaan para sa ibang gastusin.

5. Monitor and make adjustments, if necessary.

Monitor your progress in the next few months. If you find it difficult to stick to your budget it may not be right for you. It is foolish to continue using a spending plan that doesn’t work. Pero wag mo basta-basta baguhin ito para lang maisama sa budget ang panggastos para sa luho.

Throughout your lifetime you will undergo major changes in status and financial condition which may require major adjustments in your budget. A good example is getting married; expenses will surely go up when you already have a family. Job loss, promotion, a new job, a serious accident or illness can all lead to significant changes in your income and expenses. Tu-wing may malaking pagbabago sa iyong kinikita o gastusin, baguhin mo rin ang iyong budget. A budget can only be effective if it is realistic and reflects your present financial situation.

Last update: June 23, 2008
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