How to Make a Budget: Seeing your Expense Trend

Now that we have tabulated our expenses in a table. We can now create a graph using Microsoft Excel. Btw, without a graph or chart you can still use the budget method that I have shown to you. So this step is really optional.

A graph or chart is very useful way of quickly informing you visually the status of your expense versus your budget.



STEP 6: SEEING YOUR EXPENSE TREND



Since creating a chart is not new so I will not reinvent the wheel here. There are so many excellent sites in the internet that will teach you how to make a graph. Click below link:

http://www.internet4classrooms.com/excel_create_chart.htm

NOTE: Once you get to Step 5 of the link above, select XY line.

Once you were able to build a graph with your expense data, it should look like the graph above.

Now a brief explaination of the Total Expense vs. Budget graph of chart.

The blue line represents your total expense. The pink line represents your expected expense. When the blue line goes beyond the pink line like the one incircled in the graph this means that you exceed your budget. If the blue line will not go beyond the pink line or better yet will drop then your budget is on target.

So there you have it. A very quick way to check if you exceed your budget or not.

PS: If you want to know more how to save money, how to avoid debt, how to get out of debt, and how to make a budget then click HERE. This is the home page of my blog where I shared my knowledge and experience in budgeting, expense tracking, financial planning, and making a budget that is not only doable but I actually proven for 8 years. I also shared tips, which I actually use regularly, on how to save money, where to save your money, and in the process you will know how to avoid debt. Learning to avoid debt is easier than getting out of debt so I put more emphasis on staying out of debt. As a bonus, I also assembled information on how you can make your own financial planning and budget software. To get all this information for free, please click HERE.

PS: I am interested to know if you find this article helpful so please feel free to drop some comments.

How to Make a Budget: Making an Expense Summary List

Have you experienced wondering where did your money go? Don't worry you are not alone?

Do you want to be able to track down your expenses yesterday, last week, last month, last year?

If your answer is yes, then read on. I'll make it quick, promise.


STEP 5: MAKING AN EXPENSE SUMMARY LIST

This is an example of an Expense Summary List.



Things to take note of this list.

(1) The Expense Summary List is good for one year.
Each column is equal to one payday or 15-days. In the example, the payday is on the 5th and 20th day of the month.

(2) The items in the list are the same as those we can find in the Fund Allocation List. The order is also made the same to make it easier to process (to be discussed in the next posts).

(3) The total expense (TE) is equal to the sum of all the items from item 1 to item 18. The sum can be easily computed using Microsoft Excel.

(4) The expected expense (EE) is equal to your maximum targeted expense per bimonthly or per in-between paydays. This figure is the same as the total in the Fund Allocation List. (See How to Make a Budget: Making a Fund Allocation List)

(5) The out-of-budget is simply the difference between the expected expense and the total expense. Take note that I used EE - TE in my computation so that if you exceed your budget, the figure will become negative (-). This way, with just one glance you will know that you're already beyond your budget which is not a good thing. (The negative 70 (or -70) in the list means that you are P70 (seventy pesos) out-of-budget.)

(6) It is highly recommended that the entry is made at the same time as you pay your envelope (E-bank).

(7) With this list you can easily see and review where your money went. You can also use this list to make necessary adjustments to you expenses so as not to spend more than your earnings.

Congratulations! You now know how to monitor your expenses. As promised, I made it quick but I made sure that I covered everything essential in this topic. Now it's your turn! Start making that list of yours asap, and start enjoying the feeling of knowing that you can trace your expenses anytime, and that you now have the means to warn yourself from overspending.

Now live a peaceful and "bad-debt-free" life.

PS: A budget is our main tool to staying out of debt but like every other tools, no matter how high-tech or effective it is, if the user will not use it properly then it won't deliver it's full potential. The secret to keeping a budget is discipline and consistency just like in most everything else.

PS: If you want to know more how to save money, how to avoid debt, how to get out of debt, and how to make a budget then click HERE. This is the home page of my blog where I shared my knowledge and experience in budgeting, expense tracking, financial planning, and making a budget that is not only doable but I actually proven for 8 years. I also shared tips, which I actually use regularly, on how to save money, where to save your money, and in the process you will know how to avoid debt. Learning to avoid debt is easier than getting out of debt so I put more emphasis on staying out of debt. As a bonus, I also assembled information on how you can make your own financial planning and budget software. To get all this information for free, please click HERE.

PS: I am interested to know if you find this article helpful so please feel free to drop some comments.

How to Make a Budget: Making a Fund Allocation List

Wouldn't it be easier if you have a means to remind you of your budget? In this way you will be reminded of how much of your income you are free to spend.

To do this you have to make a Fund Allocation List.

STEPE4: MAKING A FUND ALLOCATION LIST



The above image represents the fund allocation list of an average income family with one child.

Things to take note of this list:
(1) The list should show your estimated take home pay. Try to be as accurate as possible with the figures.

Take Home Pay = Income - Deductions

(2) The list should show all the items you allocated you money, the amount allocated to each, and the total.

(3) Make sure that your total allocated funds will not exceed your take home pay. Doing so without extra income on the sides is like digging a financial grave -- burying yourself with debt or burning your savings.

(4) Some funds don't have to go to the envelopes. Generally, these are the funds that will be used everyday (allowance, food) or will be exhausted soon (vitamins, grocery, etc.) Examples are allowances which normally go straight to the pocket, and food (grocery) and home-use items (soap, detergent, shampoo, etc.) which normally go straight to the department store cash register right after the payday.

(5) Be creative with your list; make use of colors to make it easy to read. For example, the items hi-lited in pink will be endorsed to the wife, the blue to the husband, and the green to the E-bank.

(6) Print your list and keep a copy in your office, and in the place where you keep the envelopes. Refer to this list before you make a withdrawal from the ATM machine, and when you make a deposit to the envelopes.

In making the list, you can use word, excel and other word processors. If you have no computer then you can write your list in a notebock or piece of paper.

Now live a financially disciplined life!

PS: Previously, in my budget portfolio I did not include this list. But after I incorporated it, it made quite a difference. It made me realize quickly whether I have a money to spare or not from my income. It also help me realize how much is the minimum amount of money I need to generate on the sides.

PS: If you want to know more how to save money, how to avoid debt, how to get out of debt, and how to make a budget then click HERE. This is the home page of my blog where I shared my knowledge and experience in budgeting, expense tracking, financial planning, and making a budget that is not only doable but I actually proven for 8 years. I also shared tips, which I actually use regularly, on how to save money, where to save your money, and in the process you will know how to avoid debt. Learning to avoid debt is easier than getting out of debt so I put more emphasis on staying out of debt. As a bonus, I also assembled information on how you can make your own financial planning and budget software. To get all this information for free, please click HERE.

PS: I am interested to know if you find this article helpful so please feel free to drop some comments.

How to Make a Budget: Securing the Allocated Funds

In step1, I shared to you how to determine "ALL" the areas in you life where your income goes. The most important thing to take note here is the word "ALL".

In step2, I shared to you how to allocate the right amount of funds for each area. The important thing to remember here is that the sum of all allocations must not be more than your take home pay. If you need to tweak your allocation -- reduce something here, change something there -- then feel oblige to do so.

The hundred-dollar question is, "Where are you going to place the allocated funds?"


STEP3: SECURING THE ALLOCATED FUNDS

Buy small white envelopes. Label each envelope with the name of the area where the money will go. For example,

"God Works" envelope
"Savings" envelope
"Rice" envelope
.
.
.
"Recreation fund" envelope

It is in these envelopes where you will put your allocated money. We will call these envelopes our E-bank.

To remind you of the amount of the allocated fund, and to help you trace your envelope deposits and withdrawals, let's put a piece of paper inside each envelope and write the following:

(1) The amount of the allocated fund (only once preferably at the topmost)
(2) The date and amount you deposited (per transaction)
(3) The date and amount you withdraw (per transaction)

Religiously fill-in the papers for every transaction you made to your E-bank. This will help you in the future to trace your money just like a bank book does. Put the envelope in a safe place preferably where there is a lock.

The next important question is, "When is the best time to pay or to make a deposit to your E-bank?"

VERY IMPORTANT1: Pay your E-bank as soon as possible right "after" you receive your salary, income, commission or sales; and right "before" you make any expenses. This way you will spend based on your budget.

VERY IMPORTANT2: Avoid using the money from one of your E-banks to pay something that the money is not intended for. For example, do not use the money in the children's tuition fee envelope to pay your electric bill. You will be courting confusion here later on, and this defeat the purpose of the system.

PS: I can assure you that this system works because I've been using this for about 8 years now and so far, with God's grace of course, my finances is in order. But I can also assure you that this will not work with you "IF" you do not discipline yourself, and maintain a strong desire to put your finances in order.

PS: If you want to know more how to save money, how to avoid debt, how to get out of debt, and how to make a budget then click HERE. This is the home page of my blog where I shared my knowledge and experience in budgeting, expense tracking, financial planning, and making a budget that is not only doable but I actually proven for 8 years. I also shared tips, which I actually use regularly, on how to save money, where to save your money, and in the process you will know how to avoid debt. Learning to avoid debt is easier than getting out of debt so I put more emphasis on staying out of debt. As a bonus, I also assembled information on how you can make your own financial planning and budget software. To get all this information for free, please click HERE.

PS: I am interested to know if you find this article helpful so please feel free to drop some comments.

How to Make a Budget: Allocate Money

STEP2: ALLOCATE FUNDS

After you have identified "all" regular and non-regular expenses the next step is to allocate funds to each one of these.

How will you know how much should be allocated to each item?

In my case I combined two methods: First, I made an estimate, and then I monitored all my expenses for at least a month, and I made adjustments to the allocated fund accordingly.

Let's put some figures on our previous example based on a bi-monthly payday. Yes, it's easier if we will use per payday as time frame.

(1) God's work = P500/pd
(2) Savings = P1000/pd
(3) Rice = P500/pd
(Based on a one month monitoring)
(4) Food = P3000/pd
(Based on a one month monitoring)
(5) Mineral water = P100/pd
(Based on a one month monitoring)
(6) Electric (VECO) bill = P800/pd
(7) Telephone (Globelines) bill = P300/pd
(8) Water (MCWD) bill = P100/pd
(9) Magsy's tuition fee, and trasportation = P750/pd
(10) Belle's tuition fee, and transportation = P750/pd
(11) Leyan's share = P800/pd
(12) Family milk = P600/pd
(13) Family vitamins = P800/pd
(14) Home expenses = P600/pd
(15) Miscellaneous = P500/pd
(16) Emergency fund = P500/pd
(17) Recreation fund = P500/pd
Total = P12,000/pd

Suppose your take home pay is only P10,500, what you should do then?

When things like this happened to me before I had two good options: Either I find a way to increase my income to add P1500 (or more) or (and) I adjusted my allocation in order to slash down the excess amount, P1500 in our example. I can change the food to P2500, the savings to P500, the miscellaneous to P250 and the recreation to P250. As a general rule, I choose the expense items which I know I can live with so little of it or without it.

The other options are borrowing money to fill in the hole or simply closing our eyes and hope that the problem will go away. The first option is the one we wanted to avoid as much as possible because this will bore a hole into our savings, and later bury us alive in debt. The second option is analogous to choosing to get inside a car when you know that there's a bomb inside, and hoping it won't explode. Either option will sooner and later lead us into deep trouble.

Allocating the right amount of fund is as equally important as identifying your expense items so spend some time on this to get the most realistic figures.

Stay tuned for the continuation..."Where to Put the Allocated Funds?"

PS: For those who are in doubt please rest assured that I've already proven this system to work, so I am confident that this will also work in your case. Just be patient and give this system a try.

PS: If you want to know more how to save money, how to avoid debt, how to get out of debt, and how to make a budget then click HERE. This is the home page of my blog where I shared my knowledge and experience in budgeting, expense tracking, financial planning, and making a budget that is not only doable but I actually proven for 8 years. I also shared tips, which I actually use regularly, on how to save money, where to save your money, and in the process you will know how to avoid debt. Learning to avoid debt is easier than getting out of debt so I put more emphasis on staying out of debt. As a bonus, I also assembled information on how you can make your own financial planning and budget software. To get all this information for free, please click HERE.

PS: I am interested to know if you find this article helpful so please feel free to drop some comments.

How to Make a Budget: Identify your Expenses

To help those who wanted to learn how to make a working budget but has no one to guide them, I will share my own personal knowledge on how to make and keep a budget. This is based on my own system which I started when I got married, and had tweaked so many times in the past for improvement purposes. This is rather long so allow me to break this into several separate posts.

This is not a budgeting software but using Microsoft Excel we can easily create a spreadsheet or a sort of a budgeting software.

STEP1: IDENTIFY YOUR EXPENSES

The first step in making a budget is to identify the sinks in your kitchen or to know where does your money regularly go to after you received your paycheck. Please see below samples taken from my own list:

(1) God's work
(2) Savings
(3) Rice
(4) Food (other than rice)
(5) Mineral water
(6) Electric (VECO) bill
(7) Telephone (Globelines) bill
(8) Water (MCWD) bill
(9) Magsy's tuition fee, and trasportation
(10) Belle's tuition fee, and transportation
(11) Leyan's share
(12) Family milk
(13) Family vitamins
(14) Home expenses
(15) Miscellaneous
(16) Emergency fund
(17) Recreation fund

It doesn't matter if the list is long. What is important is that, it's realistic.

Allow me to make a brief comment on each item in the list so as to give you an idea for your own guidance.

God's work
My wife and I believe that what we have right now are blessings from God. We also believe that God wanted us (and you) to share your blessings to other people specially those who are in need.

Savings
To me, keeping a budget has two main objectives: To avoid unnecessary or bad debt, and to save money to invest once the right business opportunity will presents itself.

Rice
To us Filipino a meal is not a meal if there's no rice. In my budget I will make sure that we can buy one sack of rice by the time our current sack becomes empty.

Food
This refers to fish, meat, eggs, oil, vinegar, spices, canned goods, vegetables, etc. For simplicity this also includes biscuits, yakult or chaimito, bread, etc.

Mineral water
As of now, we are still using mineral water though I am planning to replace this with something more safer and more economical. Stay tuned once I found the right alternative.

Electric bill, telephone bill, water bill
These are self explanatory. But I think the highlight to these items is that some people already know that they have these expenses yet fail to allocate the necessary funds, so when the bills come they act as if they did not expected it...:-(

Tuition fee, and transportation allowance
Both my first and second daughter are studying in a private school somewhere in Mandaue City where we lived. The transportation allowance represents the money my wife and I paid for the carpool (temporary only), and tricycle fare (temporary also).
As of now, we did not give money allowances to our children but instead we give them biscuits and water (milk or juice) for their school snacks.

Leyan's share
Leyan is our baby daughter. The share represents her milk (Pediasure), and diaper (Pampers).

Family milk, Family vitamins
All for the entire family consumptions.

Home expenses
This represents bathing soap, washing soap and detergents, toothpaste, etc.

Miscellaneous
This is a sort of a buffer fund in case something unplanned comes up like a trip to the pediatrician, an unexpected visitor arrives, etc. If this fund will not be used, this will automatically goes to the emergency fund.

Emergency fund
This fund is for emergency situations like if I lose my job (God forbids), in case of hospitalization and the expenses can no longer be covered by our insurance, etc.

Recreation fund
This is money used to do family bonding activities like going to mall to cool off and do window shopping, going to the beach or out-of-town, playing badminton, going to our local family recreation area called "under-the-bridge", etc.


Your expenses maybe different from my list but that doesn't matter. What really matters is that your list is as realistic as possible. Otherwise, your budget may fail.

Stay tuned for the continuation..."Allocate Funds".

In the meantime be smart when it comes to handling money.

PS: If you want to know more how to save money, how to avoid debt, how to get out of debt, and how to make a budget then click HERE. This is the home page of my blog where I shared my knowledge and experience in budgeting, expense tracking, financial planning, and making a budget that is not only doable but I actually proven for 8 years. I also shared tips, which I actually use regularly, on how to save money, where to save your money, and in the process you will know how to avoid debt. Learning to avoid debt is easier than getting out of debt so I put more emphasis on staying out of debt. As a bonus, I also assembled information on how you can make your own financial planning and budget software. To get all this information for free, please click HERE.

PS: I am interested to know if you find this article helpful so please feel free to drop some comments.

She's Not a Budgeting Software But Her Idea for Staying Out of Debt is a Life Saver

“Do not spend more than you earn.”

This was an unsolicited advice that my mother used to drum on my head over and over again when I was still a small boy. When she talked about spending and budget she usually inserted this line.

Another way of looking at this principle is to imagine an empty glass with a hole in the bottom. If you fill it with water and leave the hole, then sooner or later the water will run out. If you don't manage your expenses then time will come when it will exceed your income. If this happens you are in an very unpleasant situation.

Tess earned around P3,000 bi-monthly (including overtime) as a factory worker in one of the American firms in MEPZ (Mactan Economic Processing Zone). As a single mom she had to shoulder all the expenses at home which cost about P2000. This covered the rental, food, electricity, water, etc. On top of this she was also paying P500 for her child's education. She used the remaining P500 as her allowance (for food and transportation) to work.

One day while passing thru Marina mall she saw a Nokia 3210 (latest model during that time) she felt in love with it that she couldn't sleep. Emma knew deep in her heart that she cannot afford the new cellphone but she just said "bahala na" (come what may).

The next day she borrowed money from her officemate who was into 5/6 business in order to purchase the celphone. As a proof of payment, she surrendered her ATM machine to the loan shark.

As a consequence she got buried in layers of debt for more than a year as she borrowed money from one person to another in order to pay her other debts. For example, she borrowed money from Pepeng to pay the loan shark, then later she borrowed from Rose to pay Pepeng, and the loan shark, and so on and so forth. In the midst of all this, Emma's automatic reaction was to complain a lot about her fate in life, but she didn't do much to change her situation. Instead of taking a serious look at her financial status (income versus expense), she just plodded along with life taking solice in the fact that she was not alone in her plight; her kumares in the workplace also had the same situation. Also, neither did she monitored her expenses nor made the necessary corrections to her lifestyle.

So the vicious cycle of “receiving income – dispose money until it runs out – borrow money – pray for an overtime” went on. Emma became depressed and frustrated but she believed that this was her destiny, and that she cannot do anything about it anymore.

Emma was wrong. There was something that she could do. And this is called budgeting. But the problem was she was not trained by her monther how to keep a budget because her mother was a trigger-happy spender herself.

There are so many Emma's out there who feels victim in life. But this doesn't have to be this way. One good measure to avoid being a victim of your own wrong choices specially when it come to handling money is to follow the advise that my mother gave to me.

“Do not spend more than you earn.”

This way you start fixing the hole in your glass. So be smart and live a peaceful life!

PS: If you want to know more how to save money, how to avoid debt, how to get out of debt, and how to make a budget then click HERE. This is the home page of my blog where I shared my knowledge and experience in budgeting, expense tracking, financial planning, and making a budget that is not only doable but I actually proven for 8 years. I also shared tips, which I actually use regularly, on how to save money, where to save your money, and in the process you will know how to avoid debt. Learning to avoid debt is easier than getting out of debt so I put more emphasis on staying out of debt. As a bonus, I also assembled information on how you can make your own financial planning and budget software. To get all this information for free, please click HERE.

PS: I am interested to know if you find this article helpful so please feel free to drop some comments.

Money Saving Tip #3: Don't Put Your Money in Your Pocket

“Where did my money go? Two days ago I was sure I had P2500 inside my pocket but now I only have P800 left.”

Isn’t the above statement sounds familiar. (The amount might be different but the scenario is basically the same.)We spend and spend until we end up with nothing. That's the time we will start to wonder where did the money went.

It was a Friday and I was supposed to go to SM to pay some bills – electrical bill, telephone bill, and water bill. Unfortunately, I got tied up with a very urgent matter in my workplace on that day, so I was not able to pay my bills. Innocently, I tucked the crisp peso bills inside my pocket thinking that it won’t go anywhere.

Weekend went in a blip. All I can remember was that we went to supermarket to buy some grocery, some house maintenance stuffs, and some medicines for the kids. Oh, we also had lunch in the kids most favorite dining place -- where else but in Jolibee. On Sunday the family visited my mother in Mandaue City. From there we went to the children’s favorite play area – under the Marcelo Fernan Bridge.

When Monday morning came, I dug deep into my pocket to extract the leftover of the weekend – a folded but still crisp P1000 bills. Alarm bells went crazy over my head as I felt panic and guilt all at the same time. I was suppose to close three billings but with the leftover money all I can afford to pay now was the telephone bill (P600), and the water bill (P200). I only had three options then: skip payment, borrow some money or bore a hole through my own savings. With a heavy heart, I took the third option.

I hope you will agree with me but one of the depressing things to man is realizing that he spent a money tied up to something (bill payment or investment seed money) on something unplanned and non-urgent.

So what happened?

My realization is this, “Any money put in your pocket or your wallet is as good as money lost.” It’s like putting your money in the drain. Any time soon it will be flushed down the surge and you won’t even realize it until it’s too late.

I know this does not apply to all specially to those people who are so disciplined when it comes to spending their money, but in general I believe this applies.

So what is the tip?

The tip is, “Never put your money intended to pay your monthly bills, to pay a future expense (college education), to pay an investment, etc. in your pocket or wallet, unless you intended to use it within today.” The money in your pocket or wallet should only be those that you intended to be spent any time soon like your weekly allowance.

In my above situational example, the best thing that I could have done was to remove the P2500 out of my pocket when I got home, and put it in a safe place. This way I could have avoided the regrets that followed.

Putting money that is not suppose to be spent now in your pocket or wallet is similar to an Alcoholic Anonymous member who stuffed his house with Gilby’s, San Miguel beer, Red Horse, Emperador, Ginebra, etc. You are just setting yourself to fail.

Money has many purpose and usage. Just be sure to put in your pocket or wallet only those crisp bills that you can afford to lose anytime soon.

Be cool and be smart today!

PS: If you want to know more how to save money, how to avoid debt, how to get out of debt, and how to make a budget then click HERE. This is the home page of my blog where I shared my knowledge and experience in budgeting, expense tracking, financial planning, and making a budget that is not only doable but I actually proven for 8 years. I also shared tips, which I actually use regularly, on how to save money, where to save your money, and in the process you will know how to avoid debt. Learning to avoid debt is easier than getting out of debt so I put more emphasis on staying out of debt. As a bonus, I also assembled information on how you can make your own financial planning and budget software. To get all this information for free, please click HERE.

PS: I am interested to know if you find this article helpful so please feel free to drop some comments.