The Budgetarian

How to spend, budget your first paycheck

Kathleen A. Llemit - Philstar.com
How to spend, budget your first paycheck
You must remember to commit to setting a percentage of your income to savings and investments.
Mohamed Hassan via Pixabay

MANILA, Philippines — So, you just got your first-ever paycheck. It is exciting yet you are kind of nervous because there is the risk of overspending.

Do not fret because there are tips and tricks that seasoned financial literacy practitioners are willing to share. 

Senior Financial Advisor, Certified Associate Financial Planner, and content creator Antonette Aquino shared the bucketing method that illustrated her breakdown of expenses. She also emphasized that while saving money is a priority, you must also treat yourself once in a while. 

Here are her easy-to-follow money tips: 

1. Prioritize spending on needs and avoid splurging on things that will not bring you value in the future. 

This is where the principle of treating yourself to things that brings you joy for as long as they do not jeopardize your future.

2. Use the bucketing method to separate your finances.  

This method is basically a way for you to separate your spending and saving habits. This is a good way for those who are still new to budgeting. In this method, you are advised to have four kinds of accounts: 

  • Operating Fund – This is a must for most people who have recurring expenses such as quarterly, monthly, or annual bills.
  • Emergency Fund – Allocate 20% of your income to this account for unforeseen expenses such as a medical emergency or a job loss.
  • Financial Freedom Fund – It may sound fancy, but this fund is actually key to a much better and more secure life ahead. This will help you achieve your life goals and dreams, which include retiring early or going back to school for further studies.
  • Happy Account – What’s with all those savings without treating yourself once in a while? 

3. Pay yourself first.

Consistency is key for this tip. You must remember to commit to setting a percentage of your income to savings and investments. This includes putting money into your investment accounts and buying insurance. 

4. When you earn more, don’t immediately upgrade your lifestyle.

One important factor that many people often forget is that money easily comes and goes. It doesn’t mean that now that once your salary will be increasing over the years, you are licensed to spend more of it. If you continuously level up your belongings and lifestyle every time you earn more money, you will never be able to hit your targets. Remind yourself to live below your means until you’ve begun to hit them.

5. The longer you put off investing, the harder you’ll need to work to get to the same level of financial freedom as someone who starts investing earlier. 

This is self-explanatory as it is but, yes, starting early will give you that head-start for as long as you follow the previous tips. 

6. The importance of saving money is simple: It allows you to enjoy greater security in your life. 

Aquino said that the principle behind saving money is to prepare for any eventualities such as unforeseen emergencies. She stressed that once you’re in the habit of saving, you’ll forget there was ever a time when you didn’t save. Aquino ended by saying that the habits you build will make all difference. 

Those who want to start on their financial stability journey, they may check GSave, a savings account which you can open and maintain on your GCash app. It features the GSave Marketplace that lets users select a bank partner depending on their needs. With CIMB Bank, your money can grow at 2.6% interest per year. BPI users, meanwhile, can now open a BPI MySaveUp account through the GCash App, allowing them to easily view their balance, deposit and withdraw at their own convenience. BPI account holders will also be issued an ATM card for their account, so they can access their funds via BPI branches and ATMs nationwide. To know more about the service, visit https://help.gcash.com/hc/en-us/sections/360004696233-GSave.

YouTube personality Thea Sy Bautista, meanwhile, shared similar tips. On her namesake channel, Sy Bautista shared her vlog titled, “Beginner's Guide to Budgeting + Tips! | Tita Talks.”

She shared that she learned about financial literacy and budgeting from working in her company’s team who handled its finances. 

“People think that it is a mere allocation of funds for expenses. That’s not wrong but it would be a better approach if you think of budgeting as financial game plan to achieve your goals,” Sy Bautista said. 

She added that the reality of achieving life goals such as traveling, early retirement and pursuing further education require a lot of resources. 

“Ako nagtitiwala ako that having a budget is a gateway to start working on your goals,” the vlogger said. 

Here are the steps she shared for those who want to start efficiently budgeting their money for their life goals: 

Step 1: Define your goals, assign amounts. Set deadlines. 

She said to always remember your goals because these are the reasons why you are saving in the first place. You can start by setting short-term (in the next 12 months), medium term (beyond 12 months to five years), and long-term (beyond five years) goals.

Sy Bautista reminded not to be overwhelmed with these figures. You can start by setting short-term goals and once you get the hang of it, you can work on longer term goals.

“If I want to travel in eight months and my estimated cost is P20,000, every month I need to set aside P3,000,” she said. 

Step 2: Track your income, savings, investments, expenses in the next 30 days. 

Sy Bautista shared that to be able to see clearly how to spend your money wisely, you should be able to pinpoint which areas in your spending habit that needs improvement. 

“In the next 30 days, ‘wag muna kayong magbawas ng expenses. Kung ano ‘yung normal spending pattern ninyo, i-maintain n’yo lang pero ilista ninyo, as in per item, ng papasok na pera at paglabas ng pera,” she advised. 

This practice of consciously listing down will become a helpful habit.

You may start by categorizing the types of money and expenses you regularly have. These include income (salary from full time job, commission, allowance from parents, and freelance and business income), savings, investments (real estate property, stocks, mutual funds, business investment), and expenses. 

Sy Bautista said that you do not have to necessarily invest immediately. You may opt to work on your savings first and when you have enough money saved, you may use it for investments.

She underscored the importance of breaking down your expenses into different categories because this will let you see which category you may cut down your expenses in. 

  • Fixed necessities (rent, electricity, water, internet, mobile phone, transportation, insurance)
  • Variable necessities (groceries, household items, personal hygiene items)
  • Non-necessities (meal out, mani-pedi, subscriptions, movies, night out with friends, shopping)
  • Love fund (donations, gifts, tithes)
  • Business expense (operating expenses that include employee cost, supplies, repairs, advertising, transportation).

Step 3: Compare cash inflow vs outflow.

She asked: “Paano ba relationship ng income sa savings or investments and sa gastos mo?” 

You can arrive at the answer to this question by summing up all your income, savings, investments and expenses. 

“Lahat ba ng income napupunta sa expenses? Or possible din na lahat ng expenses ninyo malaki pa sa income ninyo which means may outstanding debt kayo?” she posed the question. 

She also cited an example where it showed that majority of the expenses went to non-necessity items or habits. She said it is not surprising since many tend to be unconscious of their spending habits. 

Step 4: Make a priority list and see where you can cut back on. 

She said the goal for this step is to allocate more funds for more important categories such as payment of interest including debts, savings, and investments. She stressed that the first ever priority for anyone should be payment of interest. 

These are included in her priority list:

  1. Payment of non-income generating interest incurring debt. “There’s no point setting aside money for savings kung meron ka pang utang na nagkakaroon ng interest. Para may peace of mind kayo, unahin ninyong bayaran 'yung mga mga utang,” she advised.  
  2. Savings and investment. This will be based on the goals set in Step 1. Sy Bautista shared that a lot of financial advisors advice that a great way to start building your savings is to set aside 10 to 20% of your monthly earnings. 
  3. Fixed necessities 
  4. Variable necessities/business expense. 
  5. Non-necessities/love fund. She said that if you must cut on your expenses, you may refer to this category and the previous one. 

Step 5: Craft your budget monthly and review expenses vs budget at the end of the month. 

Sy Bautista said this is an important step because this helps you see which areas you need to improve on. 

“Baka may mga items na akala mo you can’t do without but pwede mo pala i-transfer ‘yung fund to savings and investments,” she said.  

She stressed that having a budget is not necessarily saying no to fun and to all the things that make you happy. She shared tips on how you still can enjoy on a budget. These include thrift shopping, going out on affordable lunch outs, and spending time with friends in slumber parties or sleep overs. — Video from Thea Sy Bautista Channel on YouTube

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