Tag Archive for budget

Saved Income

Do you have a stable source of cash every month aside from your job?

If you are like most of us, you probably don’t have cash-generating assets yet.

That’s okay, friend! If we keep on striving, we’ll acquire these additional sources of income on top of our earned income in the near future.

So while we still don’t have that much-coveted secondary source of income–from rental properties, franchise profit, stock dividends and the like–yet, we might just as well decide and strive to lower our living expenses and cut off unnecessary luxuries we may have.

Then, treat the amount of excess cash we had gleaned and accumulated as our: “Saved Income“.

Okay, I’m not sure if there’s such a financial term called “Saved Income”, but for the sake of posterity, let’s coin this term as:

The difference of the previous monthly living expenses budget less the actual cash spent in the current month.

Saved Income = Monthly Budget – Actual Expenses

Say, your budget last August was $1,000:

  • Rent: $ 600
  • Transpo: $ 100
  • Food: $ 200
  • Entertainment: $ 100

This September, you decided to move to a much cheaper room; cut off excessive parties, movies and gimik expenses and cook your own food instead of eating out.

At the end of the month, the actual amount of your living expenses will be:

  • Rent: $ 350
  • Transpo: $ 100
  • Food: $ 100
  • Entertainment: $ 50
  • TOTAL: $ 600

To calculate your Saved Income:

Saved Income
= Monthly Budget – Actual Expenses
= $1,000 – $600
= $400

That’s equivalent to a 3-digit monthly income ( $400) or worth P 13,480 cash back at home.

$ 400! = P 13,480 !

Where can you earn that amount of money these days? (If you know where, don’t forget to drop me an email 😉 )

Again, I just coined this terminology and definition for this article so feel free to share your two cents on this, and I hope you get the drift.

There you have it! While waiting for the monetary fruits of our businesses, properties and investments of the future, let’s decide to earn that “Saved Income” as an alternative, this very day. Just as the old adage goes: “A penny saved is a penny earned.”

Remember, every Sing Dollar you save is equivalent to around P33 back home.

Not Bad right? 😉

Easy Budgeting using this 5-Category Monthly Budgeting Technique

90102261

Do you use any strategy or technique in planning and reviewing your monthly budget?

As a minimalist, I prefer to keep things as simple as possible. I have tried several personal budgeting softwares and mobile apps, which have a plethora of functions and automated tools, but what worked for me best was just using a piece of paper, a pen, and this 5-Category Budgeting Technique.

First, I write down these 5 categories in a clean sheet of paper then fill them out one by one to get my expected total budget for the month.

  1. RENT *
  2. TRANSPO *
  3. FOOD
  4. BILLS *
  5. OTHERS

Do you notice the items marked with an (*)? These categories are my top expenses that are consuming a significant amount of my salary. I make it a point to identify, and then cut-off or drag these items down, so I can get a higher surplus for the next month.

Here is an expanded view of the categories:

  1. RENT
  2. TRANSPO
    1. To work
    2. Leisure**
  3. FOOD
    1. Grocery
    2. Eat Out
  4. BILLS
    1. Mobile
    2. Loans
    3. Credit Cards
    4. Personal Debts
    5. Membership
    6. Subscriptions
  5. OTHERS
    1. Movies
    2. Dates
    3. Tithes
    4. Events
    5. Sports
    6. Clothing

**I used to charge this to my yearly budget instead of my monthly budget since I do not usually go out of town every month.

If you are a minimalist, who does not like to tinker with a highly detailed budget plan, this simple technique may work for you.

Once you have calculated your monthly budget, subtract that amount to your monthly income and the difference should be your monthly savings.

When it comes to your savings rate, with all due respect to George Clason, I believe that it is way better if we can “pay ourselves first” MORE THAN 10% of our income. The higher your savings rate, the faster you’ll reach your financial goal.

In my view, a 10% savings rate is inadequate and will just lengthen the time for you to reach your personal financial goals. Personally, I keep 50% to at most 80% of my monthly earnings and use the lump sum I accumulate to help my parents, pay our mortgage back home, and to strengthen my long-term savings.

Let us all remember the purpose of this activity: We are doing this proper allocation of finances not to restrain the joy and freedom that we experience in our lives but to have a happy, enjoyable life while accumulating enough funds so we can be more prepared for any upcoming ordeals and be able to retire much younger, regardless if we work or not.
I have yet to meet a happy and contented person who is one pay slip away from financial disaster and who is not deep in consumer debt and house mortgage payments.

Decide today what your (and your family’s) future will be.

Be financially independent.