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: 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.

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.

Money Saving Tip #2: How to Be a Smart Buyer?

Do you consider yourself a smart buyer? If you’re not and you wanted to become one then this post is intended to give you simple guides as to how to become one.

What is a smart buyer?

In my own humble opinion, a smart buyer is someone who spend using his head rather than giving in to his or her desires and wants thereby avoiding unnecessary expense.

Daphne just received his first pay salary since joining the corporate world a month ago. To go out on a bang, she went straight to SM to buy the bag of her dream. Yes, she loves bags. Feeling that she deserved to reward herself big time, she went straight to a Gucci boutique.

After an hour or so of looking, inspecting, admiring, and repeating the process all over again for countless times, she decided to buy the vinyl monogram large tote bag priced at P9000.

The price was more than one-half of her paycheck but she reasoned that since it was her own salary she could do anything with it. At the back of her mind she was thinking that in case she ran out of money for taxi fair, she could always ask from her dad.

The following payday, she went straight to SM again to go “malling”. This time a few of her lady office mates came along with her. When they passed the Guess boutique her sharp eyes spotted the glitters of a shiny red shoulder bag. She immediately called the attention of her friends who obliged to her plea that she will only take a few minutes. After an hour or so, Daphne came out of the boutique proudly carrying a paper bag with the guess logo on it; inside was a P2000 red shoulder bag.

After six months, Daphne had a closet full of bags worth P30000. What was disturbing was that she did not use all of these.

Are you a Daphne when it comes to purchasing items? If you have a bottomless pocket or a sugar daddy or a sugar mommy then it doesn’t matter. But if you’re like most of us, then turning yourself into a smart buyer would do more good to you and your love ones.

THREE SIMPLE GUIDES TO BECOME A SMART BUYER
To become a smart buyer one has to ask at least three questions before making a purchase.

(1) Do I really need this item?
If you have something similar at home that is still in good condition then you don’t really need to buy the item. If you have enough spoons, forks, glass and plates at home (even if you have guests) then you don’t really need to buy those kitchen utensils even if these are on sale for 50%, unless you want to go into a catering or food business. That is being a smart buyer.

(2) How soon do I need this?
Granting that you do not have anything like this item at home, and you can really use it then you need to determine how soon do you need the item. If you don’t need it soon then it is smart buying to forgo the purchase. Instead you can invest the money into something so that it will grow. Remember that money has a time value.

(3) Can I afford this now?
In order to become a smart buyer you need to keep a budget. If your budget states that you can only spend P500 to purchase an item for now then it is not smart buying to buy a P800 worth of teapot. It is smart to keep the P500 in a safe place and wait for the next payday when you can add P500 to the money you save today.

Being a smart buyer means you discipline yourself to follow your head and not give-in to your wants and desires or to the wants and desires of those around you. If people start calling you stingy, "kuripot" or "tihik" then think about this: Would you rather be called names than be a person who collect items that you won’t need or worse be a person who looks well-off but in reality is buried deep in debt?

Make the wise choice, be a smart buyer today, and save yourself from debt!

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.