Adulting seems complicated when it comes to having financial freedom as your dream. But, attaining financial freedom cannot be done by manifesting alone. Proper financial management can achieve financial independence. Budgeting is a plan that helps you allocate and manage your money effectively, achieve financial goals, and attain financial stability. Below are some notes that can help control your financial future.
Understanding Budgeting
1. Creating a Budget: A detailed plan outlines your income and expenses over a specific period, usually monthly. It is allocating your money purposefully, ensuring every peso has a designated purpose (e.g. housing, food, savings, etc.).
2. Income: Start by calculating your total monthly income. Get your total income, including your salary, additional income sources, and consistent cash flows.
3. Expenses: List all your expenses, including fixed costs (rent or mortgage, utilities, loan payments), variable costs (groceries, entertainment, dining out), and irregular expenses (annual insurance premiums, vacations).
4. Setting Priorities: Differentiate between needs (essential expenses like shelter, food, kid’s education, and healthcare) and wants (discretionary spending on non-essential items like too much shopping). Prioritize needs over wants.
5. Tracking Spending: TOP.PH’s TOP Funds can be a helpful app to monitor your actual spending against your budget to ensure you are on the right track. With this app, you can create a sub-wallet for each spending category that can efficiently halt you from overspending.
Budgeting Strategies
1. Zero-Based Budgeting: Allocate every peso of your income to a specific expense, savings goal, or debt repayment, leaving no money unaccounted for. This approach is best for individuals on a tight budget or seeking to reduce expenses, requiring constant monitoring.
2. 50/30/20: Allocate 50% of your income to your needs. Place 30% of your income into wants. And the remaining 20% to “freedom” like savings and debt payoff.
3. Emergency Fund: Prioritize building a fund specifically allotted for unexpected expenses like hospital bills, unplanned house repairs, etc. This way, unforeseen financial setbacks will not disrupt your budget.
4. Debt Repayment: Allocate a portion of your budget to paying off debts, focusing on high-interest debts first using methods like the debt snowball or avalanche.
5. Savings Goals: Set specific financial goals (e.g., retirement, a vacation, or a down payment on a home) and allocate a portion of your budget toward achieving them. Budgeting is a powerful way to transform your financial future and life. By creating a budget, tracking your spending, and adhering to financial principles, you can take control of your finances and work toward your financial goals. Remember, budgeting is not about restriction; it’s about making your money work for you, leading to a secure and prosperous future.
References:
1. Dave Ramsey, a renowned financial expert, emphasizes the importance of budgeting: “A budget is telling your money where to go instead of wondering where it went.”
2. Suze Orman, a prominent financial author and television host, advises: “A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.”
3. Warren Buffett, one of the world’s most successful investors, advises: “Do not save what is left after spending, but spend what is left after saving.”
4. Jean Chatzky, a financial journalist, highlights the role of technology: “Leverage technology to make managing your money easier.”
To know more about budgeting through TOP Funds, click here:
https://www.theorangeplatform.com/category/top-funds/
