Today we pay tribute to workers in the Philippines — the heroes who toil to bring food and comfort to their loved ones. On Labor Day, we pay respects to our everyday heroes by helping them with practical tips on what they struggle with on a day-to-day basis: their budgets.
If you just joined the workforce, or your salary is that of an entry-level employee, you’re probably wondering how to make both ends meet with a starting salary of around P10,000. Believe it or not, it is possible, with the help of a personal budget.
Here are nine steps to take to get started on personal budgeting tips, especially for first timers.
1. Commit to live within a budget. This means accepting that you can’t have all you want, and that you can’t be forever asking for help from other people such as your parents. This is a decision that may initially be hard to bear, but you also have to accept that it is a means to help you make ends meet while ensuring your finances are in a good state, despite your limited income.
2. Open a savings account. This is a must. If you’re working for a company, you may have been required to open an account at a designated bank for your payroll. If this is not the case for you, then open a savings account in any commercial bank that is accessible to you. Having a bank account will help you organize your finances and help you manage your day-to-day financial transactions.
3. Know exactly how much you make. It is not enough to have a ballpark figure of your salary. You have to know exactly how much you take home after deductions have been made for the mandatories that include taxes, your SSS and Pag-ibig contributions. You may also overlook other income that you make from overtime pay, transportation allowance, incentives and bonuses. If you are among those who have extra jobs or have a business on the side, then include this too.
4. List your recurring expenses. It’s important to know exactly what you are spending for. This list would include your rent, utilities, transportation, food, and perhaps medication that you get your parents. If you are amortizing something, say something that you bought on installment, then add that amount here too. What’s important is for you to know what you have to cover on a regular basis. A manual or electronic worksheet will work perfectly for this.
5. Set aside a sum for forced savings. If you’re making P10,000, you can think about putting aside P500-P1,000 monthly as “payment” to yourself. When you open a savings account, give instructions to your bank to do an automatic transfer each payday from your payroll account. Treating savings as a recurring expense helps you to set aside money for yourself, and makes savings a top priority. Make paying yourself a habit that you should keep throughout your working life.
6. Compute the difference. Now that you know how much exactly you make and how much you need to cover each month, find the difference between the two. The difference would be your disposable income. This is the amount that you can spend on other things in the next order of priority after you have covered your needs.
7. Make the necessary adjustments. Carefully study the number you arrived at in the preceding step. If you came out with a negative number (let’s say recurring expenses of P10,000 versus an income of P8,900 monthly after deductions) , then you need to think of ways to bring down your expenses. The P1,100 monthly shortfall translates to about P37 per day. Perhaps letting go of that bottled soda from the convenience store is all you need to do to do to make ends meet.
8. Create a record over time. After three to four months, you would have a general idea of your income and expense movement, as well as your cash flow. With this knowledge, you will have a better idea as to how to manage your money on a day-to-day basis, say how much you should be spending for food, how often you can go out, and how much you can afford to spend on entertainment and clothes.
9. Compute your net worth. As your savings grow, you can also begin computing your net worth. This would be a list that includes all your money (savings account, checking account, investments) and your assets. This is an important tool that you will eventually use as your finances grow and as you begin to plan your financial future. Don’t feel bad if your net worth comes out to be just P2,000 at this point. What’s important is that you know where you stand. What you do next to make this grow is what truly matters.
Remember the popular adage that we “work to live” and not “live to work” so you don’t want to live from paycheck to paycheck. bBefore you blow your first salary to treat your family or to buy a new gadget, start handling your personal budget on a right foot and ensure a stable future for you and your loved ones.